The American Rescue Plan Act of 2021 offers several benefits for American citizens but also has provisions to help the IRS clamp down on unreported income. Under the new law, anyone who receives more than $600 from a third-party payment provider must receive a 1099 from them.
This form must be submitted along with the tax documents for January 2025. So, as a property manager, if you pay your landlords more than the threshold amount every year, you must provide them with the relevant 1099 form.
Although these new processes will take some getting used to, they are pretty straightforward, especially if you stay up-to-date with your record-keeping.
Read on to discover more about tax statements and 1099s and how they impact you.
Tax Statements and 1099s: Basic Information
Property tax statements are similar to owner statements in that they document the income, expenses, and profits for each property. Tax statements must contain the same information reflected on 1099 forms, payment apps, and bank statements.
Two types of 1099 forms apply to landlord tax filings. These are:
- 1099-K for electronic transfers, credit card, and debit card payments
- 1099-MISC for check and cash payments
You will also need to fill out a 1099-NEC for any contractors and vendors that you pay over $600 annually. This would apply to maintenance, cleaning, and repair costs for your clients' properties.
Sending 1099s is all that's required in terms of tax compliance for property managers, but you can help your landlords meet their tax obligations more easily by keeping detailed records of all transactions related to their properties, too.
Tax Forms 101
When compiling the 1099 form and tax statements, you must fill out all the required sections. For starters, you'll need:
- The taxpayer's ID number
- The address of the 1099 recipient
- Total amounts paid for the tax year
You can refer to the IRS website for more detailed information about how to fill out these forms correctly.
Landlords use the information contained in the 1099 forms and owner statements to complete a Schedule E form. This document details their profits, income, and expenses for the tax year.
They can deduct some expenses from their gross income to help reduce the amounts owed to the IRS. These include things like:
- Insurance premiums
- Property management fees
- Property taxes
- Utilities
- Maintenance and repair costs
While you can help your clients identify these deductible expenses, it's best if they work with a professional tax preparer who can help them most effectively with landlord tax filing and property management tax tips.
Beyond Tax Time
Property managers only have a small role to play in compiling tax statements and 1099s for their landlords, but they're instrumental when it comes to efficient record-keeping.
PMI Music City is a local Nashville property management company that's committed to providing our landlords with dedicated service year-round. We are backed by a national franchise with over two decades of real estate experience.
Our efficient team prides itself on precise record-keeping and providing diligent service for all our landlords. Discover an easier way to navigate tax time when you sign up with us.
