As filing season approaches, most taxpayers are fraught with anxiety for fear of getting on the wrong side of the IRS. This is especially true if you must declare income earned from anything other than a 9-to-5 job.
New landlords may experience particular difficulties figuring out what's deductible and what's not, or even whether they meet the threshold for paying tax on rental income. As a property manager, it's your task to make this as easy as possible for them.
Read on to find out what you need to know about tax statements and 1099s.
What Is a 1099?
All landlords must file a 1099-MISC tax form for "miscellaneous income" above $600. That means you must send a 1099 form to every landlord to whom you paid over $600 of rental income from properties in the last year.
The landlord uses this document to compile a tax statement detailing their rental business income and expenses for the year.
You must send this form before February 1, giving your landlords ample time to file their federal taxes by February 28, or March 31 if they file online.
Additionally, you must send 1099 forms to every contractor for whom you've paid over $600 for services during the year.
The IRS site provides detailed information for managing 1099 forms. If you have any doubts, it's best to consult a tax professional for assistance.
Necessary Information for Filing 1099 Forms
Each 1099 has space for the information necessary for accurate, compliant reporting. You need the following information:
- Tax ID Number, i.e., social security number
- Address of the recipient
- Total funds paid
Along with this information, the landlord needs to know about any expenses you've paid on their behalf, as these affect their Schedule E return. A Schedule E form details rental, income, expenses, and profit or loss for their rental property.
What About Deductions?
As a property manager, you have access to most of the information related to your client's properties. You should also provide them with details regarding the following deductible expenses for the year:
- Maintenance and repairs
- Professional property management fees
If you pay any other expenses on their behalf, such as utilities, property taxes, or insurance premiums, you should include this information, too.
Simplifying Tax Statements and 1099s
To streamline filing season and ensure your landlords have all the tax information they need, you must be proactive in your record-keeping. Trying to compile all the necessary information at the last minute will cause you a lot of stress and may inconvenience your clients.
Efficient property management software is the best way for property managers to keep track of owner disbursements and finalize 1099 forms on time.
Managing Tax Time as a Landlord
Working with a property management firm helps you sail through tax time easily and without worries. These professionals ensure accurate record-keeping, so all the necessary information is on hand when you're filling out your tax forms.
PMI Georgia has abundant experience in assisting property owners with their tax statements and 1099s. Alleviate the stress associated with filing taxes by reaching out to us today.
