Staying compliant with referral fees
Referral fees are legal in plenty of professions and off-limits in others, and the rules change by state. ReferralPulse keeps an eye on this for you. When you attach a fee to a referral with a regulated partner, it checks whether the arrangement is allowed, whether it needs paperwork, and whether you have crossed a tax reporting threshold. This article explains what it checks, what it will and will not do, and where the paperwork lives.
First, an important boundary: ReferralPulse tracks fees and payments. It does not move money, and it does not file anything with the IRS. Think of it as the assistant that keeps your records straight and flags what needs your attention, not a payment processor or a tax filer.
What gets checked when you add a fee
The moment you pick a partner on a referral that carries a commission, your assistant runs a check based on both parties' professions and jurisdictions. It comes back one of three ways:
- Allowed. Nothing stands in the way. You proceed as normal.
- Allowed, with paperwork. The arrangement is permitted, but a written fee agreement, a client disclosure, or client consent is recommended for your professions. Your assistant flags it and links you to set up an arrangement. This is advice, not a wall. It will not stop you from saving the referral, so it is on you to complete the paperwork it points to.
- Not permitted. The rules prohibit a referral fee between these two professions or in this state. The commission option is switched off for that partner, and you will see the reasons and the rule behind them.
The checks draw on real rules, including the ABA model rules for attorneys, RESPA for mortgage and real estate, the SEC marketing rule for advisers, AICPA guidance for CPAs, the federal anti-kickback and Stark laws for healthcare, and the referral-fee limits for all fifty states and DC. The goal is to warn you before you commit to something your license does not allow, not to give you legal advice. When in doubt, check with your own compliance counsel.
Set each partner's profession and licensing on their partner page. The more your assistant knows about who is on the other side of the fee, the sharper its checks are.
Fee arrangements, disclosures, and consent
When a written arrangement is called for, you can record it in the Compliance area. An arrangement captures the structure of the fee, whether a disclosure or client consent is required, and which state's rules are the strictest for the pairing. Once it is on file, a referral that uses it shows a green "arrangement on file" note instead of a warning.
You can also record, on each referral, that you provided the client disclosure and obtained the consents the arrangement calls for. Those flags live with the referral so your record is complete if anyone ever asks.
W-9s, the $600 threshold, and 1099s
When you mark a commission paid, ReferralPulse opens a payment record for tax tracking and keeps a running year-to-date total for that partner. Two thresholds matter:
- At $500 year-to-date, you get an early heads-up that you are approaching the reporting line.
- At $600 year-to-date, a W-9 is required for 1099 reporting, so your assistant raises an alert to collect one if you do not have it on file.
You can upload a partner's W-9 from their compliance tab, and ReferralPulse marks it on file. A daily check watches your arrangements for expiring agreements and licenses and for partners who have crossed the $600 line without a W-9.
Keep in mind the boundary from the top of this article. ReferralPulse flags when a 1099 is due and keeps the totals that go on it, but it does not generate the form or file it for you. That step is yours.
Where compliance lives in the app
The Compliance area only appears when your Commission Practice is set to Sometimes or Always. If you set it to Never, the whole section is hidden, since there are no fees to keep compliant. See Commissions and referral fees for that setting.
On the iOS app
The compliance checks and the W-9 and 1099 alerts follow you to your phone, so a blocked arrangement or a missing W-9 shows up wherever you review your suggestions and alerts. Uploading a W-9 document is easiest from a computer, but you can read every alert and open the referral or partner behind it from the app.