When the January 31st deadline for 1099 forms creeps around each year, many landlords can find themselves in a scramble to get the correct forms to the IRS. As overwhelming as the paperwork can be, getting it right is crucial to keeping your business compliant.
Thankfully, you only need a little knowledge to get your tax filing where it needs to go. This guide will break down the crucial elements of handling tax statements and 1099s effectively.
The Importance of Understanding Tax Statements and 1099s
Tax statements are essential documents that detail the income you've collected from your rental properties throughout the year. 1099 forms report non-employee compensation that includes payments made to contractors and service providers. Luckily, property owners and managers only need to interact with three of the 17 1099 forms that exist, these are:
- The 1099-MISC
- The 1099-NEC
- The 1099-K
Failing to manage these documents effectively can lead to costly mistakes and harsh penalties.
The Purpose of Each 1099 Form
The 1099-MISC form is the primary form on which landlords record their rental income. If you've received more than $600 for the tax year, that must be recorded in a 1099-MISC, which you then send to the revenue collector.
The 1099-K covers business income totaling more than $5,000 in a given tax year received via credit card or third-party payment platforms (e.g., Venmo). This means you'd use a 1099-K if you're in the very special case where:
- You run your rental properties under some form of business;
- Your tenants pay rent with credit cards or through third parties, and;
- The amount you've collected in the tax year is over $5,000
Self-employed property managers (whether full or part-time) would report their earnings on a 1099-NEC form.
Best Practices for Landlord Tax Reporting
Effective tax filing for rentals is a cornerstone of property tax management. One of the best ways to prepare for the next tax season is to get an online portal.
The convenient payment functions in these systems record payments, maintenance requests, and other crucial information. This makes it far easier for a landlord or property manager to fill out the form correctly.
Sometimes, landlords find themselves buried under paperwork and can't figure out how to file their taxes on time. In these cases, it's best to outsource your accounting and landlord tax reporting, at least for a short time. The cost of the service is often far less than the potential penalties.
Manage Your 1099 Forms Like a Pro Today
Once all the correct information is on the correct 1099 form, you simply send that completed form to the revenue services. However, if this seems impossible before January 31st, we have the muscle to help you today.
PMI Lakeshore is owned and operated by a team with more than 50 years' worth of business experience between them. We combine that experience with cutting-edge digital solutions to give our customers help with all things property management.
Contact us today for expert property management tips for tax statements and 1099s as well as all your other property management tax concerns.
