Property managers face myriad responsibilities. Besides daily tasks like tenant requests and grounds maintenance, they are often in charge of financial reporting and accounting. This includes tax preparation.
Until recently, landlords did not have to file a 1099 for rental income under $20,000. However, new IRS standards lower the amount to $5,000. It is important to understand all the rules surrounding these changes.
Below is a property manager's guide to tax statements and 1099s. Keep reading to find out how to follow the appropriate steps so your real estate business is in full compliance with the law.
Understanding 1099 Forms
Form 1099 refers to a collection of tax documents used to report different types of income. While there are exceptions, 1099s are used to report payments over $600 (cumulatively) that do not come from an employer.
This includes rent and other payments from tenants. Form 1099 also is appropriate for reporting payments to independent contractors.
There are several subcategories of 1099s, but the most common ones are the 1099-NEC and the 1099-MISC. Form 1099-NEC is for reporting income that did not come from an employer, while the 1099-MISC is for reporting miscellaneous income.
For instance, a property manager might fill out a 1099-NEC and send it to an independent contractor for work done to the property. They would fill out a 1099-MISC and send it to the landlord for reporting rental income.
How to Complete Form 1099 for a Landlord?
You can obtain Form 1099 from the Internal Revenue Service's website. In addition to the landlord's name and address, you will likely need their taxpayer identification number. This is usually either their Social Security number or Employer Identification Number.
Next, you will tally income, or the total amount of payments made to the landlord during the previous calendar year. This includes rent, but also a few other items as well.
You should include lease cancellation payments as well as special fees for pets or parking. Security deposits are considered rental income as well, except if it is refundable and returned to the tenant.
You should also include tenant-paid owner expenses and in-kind payments, such as tasks or services performed in lieu of rent. Finally, you will need to determine if the landlord was subject to backup withholding and if federal or state income tax was withheld during the year.
Once these boxes are completed, you are ready to send the tax statements and 1099s to the landlord. The deadline for doing so is January 31. It is important to adhere to this due date to avoid potential penalties or fines for late filing.
Learn More About Tax Statements and 1099s
Now that you know the basics for tax statements and 1099s for landlords, you can get started. An experienced property management company can further assist you in preparing taxes for your real estate business.
PMI Georgia is a full-service real estate assessment management company, offering comprehensive residential and realty assistance. We are locally owned and operated, and pride ourselves on exemplary customer service. Reach out to us today to schedule a free consultation.
