As a property manager, you pay money to your landlords for rent received. You also pay contractors and other vendors for services applicable to your landlords' properties.
That means you must complete some paperwork before tax filing season gets underway. Tax statements and 1099s are the main forms you need to know about when it comes to tax reporting for property managers.
Read our concise property management tax guide to explore how you can help your landlords breeze through tax time.
Tax Statements and 1099s Explained
Landlords who earn rental income from California properties must complete a California tax return, even if they live out of state. California residents must declare their rental income, regardless of the property's location.
You must provide all your landlords with the correct 1099 form for income that exceeds $600 in a year. There are three main types of 1099 forms, namely:
- 1099-MISC for rental income received
- 1099-K for payments received via online platforms, like PayPal
- 1099-NEC for payments to contractors or other vendors
You'll find many 1099 filing tips on the IRS website to help you complete these forms correctly.
Tax statements are a summary of your landlord's income and expenses. They contain income information, like:
- Rent received
- Security deposits
- Laundry fees
- Late penalties received
They should also include the total monthly expenses incurred for a property, including:
- Property management fees
- Property taxes
- Maintenance and repairs
- Cleaning fees
- Marketing costs
Many of these expenses are tax-deductible, so it's important to get them to your property owners well before the tax filing deadline.
Be sure to include copies of invoices, receipts, and property tax documentation with your tax statements and 1099s. These supporting documents can help your landlord's tax preparer maximize their deductible expenses.
How to File 1099 Forms
The first step when it comes to tax time is gathering the necessary data from your accounting records. This is easily gleaned from monthly owner statements.
Some types of property management software can do this automatically and generate all the information needed in a single report. Once you've got everything together, it's easy to complete the correct documents and email them to your landlords.
You must also submit the correct forms to the IRS via e-filing. If you don't do this before the deadline, the IRS can disallow deductions and implement penalties against you and your landlords.
These fines can be as much as $280 per form.
A Property Manager Helps Simplify Tax Compliance for Landlords
Property managers play an instrumental role in helping landlords meet their tax obligations, especially in cases where they own multiple properties. Busy property owners can lose track of their income and expenses without keeping their records up-to-date, causing last-minute panic come tax time.
PMI Patron is the premier property management company in the Seal Beach area. Our team has decades of experience in every aspect of real estate, from record-keeping to property maintenance.
Our strength lies in delivering prompt, professional, and friendly service to our landlords, including submitting their tax statements and 1099s in good time. Discover what we can do for your California rental business.
