The start of each calendar year is a busy time for many businesses, and property managers are not left out of that category! Whether you are a large property management company or an individual property manager, this is the time when all tax forms must be issued for funds paid to owners or providers of rental properties during the calendar year. previous. The form used to complete this task is the 1099-MISC, and this form must be submitted to the recipient and the IRS on a specific date each year. When 1099s are submitted to the IRS, they must be accompanied by a summary form, Form 1096, to meet tax filing requirements.
– Why is the 1099-MISC necessary?
The IRS uses 1099s to control any source of income that is not reported on a traditional W-2 form, which only shows income received as salary or wages. This is one way the IRS captures any income received by an independent contractor or owner of a rental property that would otherwise go unreported. A property manager or property management company acts as a trusted source for the IRS to help enforce all income reporting.
– Who should receive a 1099-MISC?
• Owners of rental properties – All owners of rental properties who have received $600 or more in rental disbursements in a given calendar year must receive a 1099-MISC.
• Providers – All independent contractors or unincorporated vendors who received $600 or more in a given calendar year for services rendered must receive a 1099-MISC.
– When is it NOT necessary to file a 1099-MISC?
Every situation has exceptions, and filing and filing taxes is no different. Here are some of those exceptions:
• If the total payments to the owner or seller of a rental property are less than $600, a 1099-MISC is not required.
• If the owner of a rental property is a corporation, it is not necessary to file a 1099-MISC.
• If a provider is an incorporated business, a 1099-MISC is not required.
– What information is required on a 1099-MISC?
• Tax Identification Number – This can be an individual’s SSN or an EIN for an unincorporated organization.
• Address – This is necessary for the 1099-MISC to be sent to the recipient.
• Funds Paid – This includes a total of all income paid to a seller or owner of an individual rental property during the previous calendar year. (Remember, only if the total is greater than $600)
– What boxes are used on a 1099-MISC to report income?
• Owners of rental properties: All income collected that was for rental should be reported in Box 1 “Rentals” on the 1099-MISC. Any additional income paid (late fees, utility bill refunds, NTQ charges, etc.) should be reported in Box 3 “Other Income” on the 1099-MISC.
• Providers – All payments made for provider services must be reported in Box 7 “Non-Employee Compensation” on the 1099-MISC.
It is also good practice to send all owners of rental properties a copy of their financial statements for the previous calendar year so they can see where the amounts in each box on the 1099-MISC were derived.
Failure to file 1099 forms when required can result in penalties and fines from the IRS, so it is very important to keep accurate records of amounts paid to each seller and owner of the rental property and to request the necessary forms you can. need to file tax forms to be compliant in this process.