Filing taxes can feel like diffusing a bomb. You're unsure what numbers to put where. A slight mistake can cause the whole thing to blow up in your face.
Property management taxes are no different. The good news is you can go in with enough information to come out unscathed.
Read our guide to tax time and sending tax statements and 1099s.
1099 Types and Requirements
Form 1099 is used to report taxable money from non-traditional sources. In addition to landlords, these may include:
- Self-employment
- Contractors
- Vendors
- Small businesses
There are several types. Most information will go on a 1099-MISC form. It's necessary if you receive payments via cash or check. It's also the place to put:
- Rent
- Healthcare payments
- Legal fees
Another type of form is a 1099-NEC. It works similarly but is given to anyone who receives non-employment income.
The final type is Form 1099-K, which reports payments made using credit cards or electronic services like PayPal.
1099 Filing Process
You'll need to send a 1099 to all payees. In addition to landlords, that could mean professionals such as:
- Home painters
- Plumbers
- Landscapers
- Electricians
- Attorneys
- Bookkeepers
- Locksmiths
Collect W-9 forms to obtain their taxpayer identification numbers. They'll also tell you if they're exempt from receiving a 1099 form and which one to give them.
The 1099 filing process primarily involves knowing what to put where. Be sure to include each payee's:
- Taxpayer ID number
- Address
- Total amount paid
You can also take advantage of several tax deductions when filing your tax statements and 1099s. They include expenses such as:
- Marketing
- Property management fees
- Insurance
- Salt Lake City property taxes
- Property maintenance
- Utilities
- Depreciation and amortization
Landlord Tax Compliance
Tax statements and 1099s must be sent and filed by January 31st. This deadline is strict, with few exemptions.
Failing to maintain landlord tax compliance is about more than being the best landlord or property manager you can be. It's a legal requirement to protect yourself and your investment.
Any deviation can come with significant consequences. It can trigger an IRS audit or force you to pay fines.
Effective Tax Strategies
Start tax preparation as early as possible. Last-minute panicking will lead to errors or leave you without the necessary information.
One of the most effective tax strategies is to keep careful property records.
Look over the details in your owner statements. They will help you keep track of your income and expenses for the year. That means determining how much you paid each payee and what deductions you can claim.
Use software and get help from other professionals. It helps simplify the process and ensure accuracy.
Get Help with Tax Statements and 1099s
There's no need to dread tax statements and 1099s. With some help, you can understand what forms you need and how to fill them out while remaining legally compliant.
Wheeler & Associates is a property management company in Salt Lake City. We've been working to better the community since 1973.
We only use the best local vendors whose work leads to faster repairs and more satisfied tenants. We're experts in the local market and monitor its changes using the latest technology. Contact us to maximize your investment today.
