As a property manager, one of your duties is to explain the intricacies of tax statements and 1099s to your clients. Previously, you might have considered the process somewhat simple. After all, it used to be okay to collect rent payments without reporting the earned amount during tax season.
However, that will change soon. While there may be a delay in implementing the Internal Revenue Service's (IRS) new rule regarding rental income, it will be enforced. Any rental income over $600 must be reported during tax season.
Here's what else you need to know about taxes and rental income.
Making Sense of Tax Statements and 1099s
The IRS considers rental income as earnings from a non-employment channel. So, if you're collecting rent payments in Portland, OR, you must report earnings that exceed $600 during the year. Now, if you use an electronic payment processor or landlord software, you may receive a 1099-K form.
If you don't receive one electronically or in the mail, know that you still have to report rental income to the IRS on your tax return. For corrections, you need Form 1040 (tax return). Keep in mind that if you don't file the proper forms, you could face penalties, fines, and interest.
Do note that some services, such as PayPal and Venmo, provide 1099-K forms to users. If you use a payment processing vendor that does not have such forms, you'll have to file the appropriate form yourself.
1099-MISC and Other IRS Forms for Rental Income
For rental property owners, don't forget that qualifying payments should be reported to the IRS on Form 1099-MISC. One copy goes to the IRS, while the other is for the entity that made the payment.
Besides a 1099-MISC, landlords must provide tenants with Form W-9. Additionally, for private landlords, note that a Form W-9 must be given to property management companies or property managers.
Other 1099 forms you may come across as a property manager or landlord include 1099-A, 1099-INT, 1099-OID, and 1099-R. If you're a newbie rental property owner in Portland, OR, worried about tax statements and 1099s, consider consulting a property management company or hiring a tax professional to help you way before tax season rolls in.
Additional Notes About Tax Statements
You've sorted out the 1099 forms, but don't forget to file a Schedule E, as it is part of your personal tax return. Schedule E covers rental income and expenses, as well as general profit or loss from properties you're renting out.
The more organized you are with these tax statements, the better your property manager can forecast your financial performance. With this, you'll be on top of your expenses and investment decisions. Also, in case of an audit, you'll have nothing to worry about if your tax statements are well-documented.
Let Us Help You With Your Tax Concerns
Are you a property manager needing help with clients' tax concerns? Perhaps you're a newbie landlord or rental property owner who finds tax statements and 1099s confusing.
We can help you. As a full-service real estate asset management company, PMI Bridgetown can provide customized property management solutions. If you wish to grow your investment, our state-of-the-art technology includes financial reporting and other essential features.
Don't wait until tax season becomes hectic. We encourage you to schedule a consultation to discuss tax statements ASAP.
