Summary: Include the income when it is earned, not when it is received. For real estate agents, this is most often considered to be the date that all conditions are met on the sale, as opposed to the closing date. So relying on a tax return may lead to errors in the calculation of income replacement benefits.
Background: In real estate sales, an agent performs many tasks in order to sell a property. Most of the work is performed prior to the sale, although the agent receives no compensation related to this work until the sale closes. Many offers are conditional on some future event, such as the purchaser being able to obtain financing or a home inspection. Once the purchaser waives the conditions of sale, the offer becomes “firm” and the payment of the commission becomes reasonably certain. Continue reading