.webp)
According to the IRS, around 10.6 million people in America declared rental income on their last tax returns. If you're a landlord or a self-employed property manager, you'll be part of this number the next time the Revenue Service wants its dues.
Navigating tax statements and 1099s can seem daunting for landlords and property managers. In this article, we'll summarize the essential information needed to make surviving tax season easier. Keep reading, and you'll learn about:
- What tax statements and 1099s are
- Different types of 1099 forms
- Tax filing procedure tips
Tax Statements and 1099s: What They Are and How They Work
A tax statement is any document that describes how much tax you owe to the IRS (or have paid to the IRS) and why you owe or paid that value. There are many different kinds of tax statements, including W2 forms, 1040s, and 1099 forms.
1099 forms are relevant to self-employed property managers and landlord tax responsibilities because they record non-employee compensation. Whenever someone pays you on a contractor basis (outside the employment relationship) or pays rent, they must record that transaction in a 1099 form. They then send a copy of that form to you and the IRS.
Different Types of 1099 Forms
There are currently 17 different kinds of 1099 forms, but only three apply to every landlord or self-employed property manager. These are:
- The 1099-MISC form
- The 1099-NEC form
- The 1099-K form
Before the NEC, the 1099-MISC covered self-employment (contractor) fees and all other miscellaneous forms of income. However, since 2020, the MISC form has only applied to sources of miscellaneous income, one of which is rent income. If you're a landlord, your tenants must use one of these, declaring rent payments to the IRS at least once a year.
1099-NECs took over the job of reporting contractor earnings. These are the 1099 forms for property managers who run their businesses in their own names.
1099-K forms are for when you've received money via credit card or a 3rd party payment service (Venmo, CashApp, PayPal, etc.). The IRS's goal for these forms is to have the same $600 threshold as 1099-MISCs.
Tax Tips for Landlords and Property Managers
Having accurate tax statements and 1099s and filing them on time are two major components of landlord and property manager compliance. However, not many people are aware of their exact tax responsibilities.
One of the best ways to beat stress during tax season is to send the relevant 1099s to the people who've paid you (e.g., landlords ask their tenants to fill out and file the required 1099-MISC). This is an effective tactic, especially if you manage the bookkeeping or accounting information.
Get Ahead This Tax Season
Landlords and property managers need to file the proper tax statements and 1099s to stay compliant. Luckily, there are only three 1099s relevant to the rental and property management business.
These 1099s are also easy to work with. The payer simply records their payments to the payee (the person receiving the income) for the tax period. They then give a copy to the payee and another to the IRS.
If you want a Richmond property management service that understands VA's tax laws, contact Renters Warehouse today. We're leaders in the Richmond property management community.
