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Property Manager’s Guide to Tax Time and Sending 1099s to Landlords

Property Manager’s Guide to Tax Time and Sending 1099s to Landlords

Tax statements and 1099s. Few things are as stressful as those two - especially if you have no idea what a 1099 is or if you even need one.

Tax season is troublesome enough for regular W2 employees, but when you add in additional income and paperwork, the stress escalates.

Fortunately, there are some things you can do to make the tax season less stressful.

One way is understanding how 1099s and real estate taxes work. That's important for both landlords and property managers - not understanding 1099s can get you in serious financial trouble with the IRS and state governments.

So what is a 1099, and how do they work? Here's what you need to know.

What Is a 1099?

A 1099 tax form is to be filed for "miscellaneous income." That income includes $600 or more paid to anyone for prizes, income payments, and rent. For property managers, that means a 1099 form must be sent to every landlord for whom you pay $600 or more in rental income each year.

1099 forms are used to report non-employee or miscellaneous compensation. This is different from a W2 form that most of us may be familiar with, where an employee is on the payroll.

Many independent contractors also receive 1099 forms. However, they usually receive a 1099-NEC for nonemployee compensation. For a landlord who receives rent, they should receive a 1099-MISC for miscellaneous information.

A 1099-MISC for the previous tax year should be sent to the recipient by February 1. The due date to the IRS is February 28 (or March 31 if filed online). For complete instructions on how to fill out and send 1099, check out the IRS site.

Keep in mind this is only for federal law. Every state is different, and some, like New York, do not require filing a 1099 with your state taxes.

However, if you reside in a different state, the law may be different, so it's best to consult a local tax professional.

What if I Don't Have a 1099?

What if you don't receive a 1099? Ideally, your property management company should send you one. A good property management company should be proactive and send you your 1099s on time.

However, if they haven't, you as the landlord, are still required to report your miscellaneous rent income to the IRS.

If not, you may receive a tax bill from the IRS, along with penalties. The penalties vary, but in general, factors affecting the penalty include the number of missing 1099 forms, how late they are filed, and the income amount.

Don't let your local real estate investment become a headache.

Don't Miss Out on Your Tax Statements and 1099s

Tax statements and 1099s can be confusing, especially with tax law changing annually. Don't miss out on a 1099 and undergo hefty penalties on your rental properties.

Instead, let us manage your rental property. We manage properties throughout the Sarasota Springs area.

We can handle all aspects of property management, including making sure you get your rent and 1099 tax statements for every property.

Get a free rental analysis today.