Posted by Brad Crouch on December 12, 1998 at 16:18:22:
I think Ron Legrand’s method of paying people who supply leads and photographs about $10 for each lead is a good idea. This would be an instance where other people are finding the leads and bringing them to you. Some folks pay these people only if they close on the deal, so they must wait for the closing to get their money . . . although they will undoubtedly get more than $10.
My point is that when you are the one finding the deals, why should you be content with $10 for a lead or even $1,000 after waiting for closing? As real estate investors (not bird dogs), we’re supposed to be smarter than that. We know how to negotiate the best deal possible and get the property under contract. Then those contracts can be assigned . . . with more profit than if we had let someone else decide how much we were to get, as a “bird dog”.
About the “bookkeeping” question: I’m not a lawyer, accountant or tax advisor so all I can tell you is how I see it.
The amount is $600 per year. If you pay more than that to any one person or company, not a corporation, you’re supposed to send them a 1099. Of course that’s when you want to deduct those amounts from your own taxes. There are payments that are “provable” (cancelled checks, etc.) and payments that are not “provable” (cash or bartering services). Whether or not you are “required” to send out 1099 forms when $600 or more has been paid during a calender year, I’m not really sure.
I wouldn’t worry about 1099’s or “monitoring” small amounts of cash paid to lead generating people. This would probably get you the reputation of being a “penny pincher” and you don’t really need that.
By deducting these small amounts of cash as a cost of doing business, doesn’t seem to me to be worth the actual amount of money saved.
I’m talking about the $10 per lead cases, not the $1,000 or so you might pay if that is your method. For those kinds of amounts, I would suggest talking with your tax accountant.