Besides actually paying your taxes, one of the biggest tax related stresses for property managers involves 1099-MISC reporting. Property managers are required to issue a 1099-MISC tax form for any service provider or owner who receives more than $600 related to their rental business.
This tax season, the IRS requires everyone to provide a 1099-MISC to their recipients by Jan. 31, 2019 and to the IRS by April 1, 2019. Keep in mind, the April 1st deadline only applies if there is no information in Box 7. If there is information in Box 7, the deadline is January 31st. The penalties for failing to file 1099s can be very expensive so it is important to understand your obligations when it comes to 1099 requirements for your rental business.
Why are 1099s necessary?
The IRS relies on 1099s to monitor income sources not recorded on a traditional W-2 form. W-2 forms report salaries and wages, and miscellaneous income is reported on a 1099 form. 1099s are an additional way for the IRS to capture an independent contractor’s income that might otherwise go unreported. While an independent contractor is required to honestly report all his earnings, the IRS relies on you to help reinforce the required income reporting information.
Who gets a 1099-MISC form?
- Owners – A property manager must use Form 1099-MISC to report rent paid over to the property owner in excess of $600 during the tax year.
- Independent Contractors – A property manager must use Form 1099-MISC to report funds in excess of $600 paid to any unincorporated vendor or service provider including:
- repairmen
- plumbers
- carpenters
- landscapers
- Attorney fees to handle an eviction or collect unpaid rent (even if the legal services were provided by a corporation).
Basically, you must file a 1099-MISC form for anyone you paid more than $600 to in the course of a year that is NOT a corporation.
What information do I need to file a 1099?
For each individual you will file a 1099 for, you will need a:
- Tax ID Number – For individuals, this is their social security number (SSN), and for businesses it’s their employer identification number (EIN).
- Address – For a copy of the 1099 to get sent to them, for their tax reporting requirements.
- Funds Paid – You will need to know the cumulative amount of money issued to the individual during the tax year.
Your owners’ and vendors’ tax ID number and address can be captured via a W-9 form. A W-9 form is an official IRS document used to request and certify a taxpayer’s identification number and address. It is always a good idea to require a vendor or owner to fill out a W-9 when you first engage in business with them so you do not have to scramble for this information come tax reporting time.
How do I file 1099s for my property management business?
1099s can be mailed or electronically filed with the IRS. If a business is submitting more than 250 1099 forms, they are required to do so electronically.
Property management software makes it easy for property managers to complete 1099s and meet your tax reporting requirements. Property management software should always have integrated accounting features that records owner and vendor payments made throughout the year and generates easy to read reports that summarize important tax reporting information. The right software will provide you with a way to file your reports online from your account (e-file) or print out a tax assistant report to give your CPA or use for manually filing 1099s.
You can see just how easy Rentec Direct makes electronic 1099 filing for you with this how-to video .
When do property managers NOT need to file a 1099?
There are a few exceptions to the 1099 requirements
- Exceptions regarding owner payments: 1099s need not be filed where the payee is a corporation. This means if a corporation owns the rental property, you do not need to submit a 1099 form regarding payments made to the corporate owner.
- Expectations regarding vendor payments: The same holds true if you hire an incorporated business, instead of an unincorporated independent contractor, to perform maintenance, repair or other services on a client’s rentals.
These exceptions only apply to corporations, not to limited liability companies (which are very popular with both rental property owners and maintenance vendors).
What are 1099 requirements for rental owners?
If you self-manage your rental property you own, you may wonder about your 1099 requirements. Back in 2009, a clause in the Affordable Care Act required rental owners to report 1099-MISC income paid to service providers in relation to the rental property. In 2010, the clause was further clarified with the Small Business Jobs Act and the Health Care Reform Bill. BUT, by 2011 the requirement was repealed, making it not necessary for private landlords to file 1099s to vendors for work related to their own rental property.*
*The penalties for failing to file 1099 tax documents are high, so you should always speak with a tax professional who is familiar with rental real estate tax requirements if you have any questions or require further clarification.
Want to use Rentec Direct to electronically file your 1099 tax documents? It’s easy with the 1099 Tax Assistant and integrated e-file functions. Property managers and landlords can find convenient e-filing options for 1099s within their rental management software. Through services like Rentec Direct, 1099s are automatically generated based on your financial records and vendor payments recorded throughout the year, so sending 1099s to recipients and filling with the IRS is a breeze
Save money and time with electronic filing services in Rentec Direct.
Updated: December 3, 2018
I am a independent contractor. And work for property preservation company 5yr. But last 3yr even after me asking for my 1099 employer never would give me 1099. Who can i go to? Or what can i do?
Hopefully you have kept good records of your income as an independent contractor so you know what to report to the IRS. You wont need to personally submit 1099s to the IRS when you file your taxes, but you will need to report accurate income. Just keep copies of your paystubs or paychecks in your records to provide proof of income and make a note that you never received a 1099, just in case.
Do the landlord/owner file a 1099 for the fee paid for the rental management company?!
An owner typically would not submit a 1099 to the property management company; the property management company should however provide the owner a 1099 showing rental incomes.
my accountant said that for the Jan. 2019 deadline, even as a small landlord, it is required to give my property manager a 1099 if the commission is above $600, they said it is a new strict rule, have you heard of it? my property manager never heard of small landlords giving out 1099 for the commission to them.
Oh, interesting. I have not heard of this new requirement. As it’s usually the property manager who sends an owner disbursements and thus submits a 1099s based on those payments to the owner. I will ask about it and see if I can find any research. If your accountant is asking for this information, it can’t hurt to provide the 1099 to him and a copy to your property manager. I am curious if this a state requirement. What state do you live in?
I have a rental property for which I use a property management company. They have still not provided me with a 1099. What is the best way to proceed if they fail to provide one?
Do you have receipts for the rental income they have paid you throughout the year? That would be the best way to estimate how much would be reported on the 1099.
Kaycee, if for Victoria’s case and my case that our property management does not send us a 1099 but we do report our rental earnings, do we still get fined if we did not get their 1099? thank you.
You shouldn’t get fined if your numbers are accurate. Your property manager can get in trouble for failing to file 1099s with the IRS and not giving you a copy though.
Should the box 1 for the 1099 rent amount be the total operating cost including the property management fees and also the fees paid for repairs? It seems like it should be the total amount the rental property owners got minus those expenses.
It’s best to consult with your accountant on how to report information in box 1 for a 1099. Some property managers believe they should report on rental income (gross), while others believe they should report on net. Your accountant will be able to give you the best and most accurate guidance on the issue.
A typo in your article:
This tax season, the IRS requires everyone to provide a 1099-MISC to their recipients by Jan. 31, 2018 and to the IRS by March 31, 2016.
2016?
Opps, thanks for pointing the mistake out. I have updated the article to reflect the right year for the tax deadline.
What to do when a Property Manager DOES NOT send you a 1099 for a Condo that he managed and wont respond to your VM’s/Emails?
Do you have receipts for the rental income they have paid you throughout the year? That would be the best way to estimate how much would be reported on the 1099. In terms of lack of communication, it sounds like you might need to find a new property manager.
We pay rent to a property management company that probably is a corporation, but the owner of the building is probably a private party. Should I file a 1099 at the end of 2018 for payments to the rental company?
I assume you are asking about a commercial lease agreement and rents paid for a commercial property. It might depend on how the property management company is classified (ie S-corp, LLC, etc). I would talk to your tax professional for advice on how to move forward.
I use a management company for my rentals and I got a 1099-Misc from them. when reviewing the info in my tax software it shows that I have entered the rental royalties in miscellaneous income and in the schedule E. Should I just report the rental royalties in the Schedule E?
My question remains “Does the business paying the property manager need to file a 1099 on the business receiving the money”? The relationship between the property manager and property owner is none of my business. Thank you for any help.
I manage 2 properties in Mexico and the owners are Mexican nationals. I obviously can’t file a 1099 for them! How do I report the income from Airbnb?
My boyfriend and I are 50% owners of a rental property. We have a joint checking account to manage finances for the rental property and the property manager will be depositing the monthly rent payments into this account. Should the property manager split the rent into have and deposit two separate payments into the account and send each of us a 1099 for 50% of the gross rental income collected by the property manager for the year?
Hi Tina,
Since you have such a unique situation, I would definitely recommend seeking the advice of a tax professional in your area. They will be able to tell you the way to deposit payments to best ensure that you avoid any accounting nightmares once tax season rolls around.
Is there a requirement for a 1099 when a fixed bushel rent agreement is used on farm land in MN. They supply us with 60 bu. of corn per year per acre we market it, not necessarily the same year of production. If so how would you come up with the value of the crop since it has not been sold yet?
I think you can estimate based on last year’s sales and price. And then you would do an adjustment when you actually sell it. I would ask your accountant for exact recommendations.
I am taking over management of my own property in FL, in 2019, from property manager since they are inept at doing so. How do I handle this tax wise for 2019 taxes? thanks!
Smart move taking over management if you are unhappy with the quality of work your current manager is providing. As for taxes, you’ll need to keep good records of expenses when it comes to deductions you can claim for 2019. Here’s a guide that will help you out. https://www.rentecdirect.com/blog/tax-tips-rental-properties-rental-income-deductions-landlords/
It’s also a good idea to work with an accountant or tax professional, at least during the first year to help answer questions and put you on the right track for subsequent years.
Hello, we are a property management company and have done “One time rentals” where we simply place the tenant, collect the first months rent and the owner takes care of everything after the move in. Do we need to send 1099’s to these owners if it is over $600.00 as well? Thank you!!
If you sent payments to owners that were more than $600 within a calendar year, then yes, I would send them 1099s.
Hello, I have a rental property that is managed by a property management company. I am about to have some work performed on the property (roof replacement). Usually, when I have work performed on the property, the property management company will find a contractor. Then I pay the property management company, in turn, they pay the contractor. Since this contractor is one that I found and does not meet all of their guidelines, they will ensure work is complete but will not be involved in the payment process. So, I will have to pay the contractor. The work will be $8000+. Should I issue a 1099 MISC to this contractor?
If you pay the roof contractor directly, yes, you would need to provide them with a 1099.
Actually, to further clarify, there would be instances where you might be exempt from issuing a 1099. If the roof contractor is a corporation you do not need to issue a 1099. You might also need to check the guidelines for further clarification on whether a contractor that is a LLC or a LLC-S(s-corp LLC) would require a 1099. I advise you speak with your accountant.
I pay a property manager 10% of rent collected for 2 properties. The property manager hires contractors to do repairs and maintenance. I pay the property manager for any work done and he pays the contractor. The property manager is not a corporation. Do I send the property manager a 1099 for the 10% fees he gets and the repairs and maintenance costs. Or do I just send a 1099 for the management fess paid to the management company?
That’s a really good question. I would think you send the 1099 for all moneys paid to the management company (so it would include the 10% fee and the repairs and maintenance), since the manager would then submit a 1099 to the contractors for the money they paid them. I think this is an excellent question for your account, so you can make sure you are getting the most accurate information for your situation.
Kaycee, I have a question. My property manager is putting my rental income from the house I rent in box 3 on my 1099 and not in box 1 ( which says rents) as my accountant is asking for. She says she always puts it there and she doesn’t have another government form. I don’t know what to do, should my accountant put in the right box? It seems like it will all look strange.
Personally, I would follow the recommendations from your accountant.
Hi Kaycee, I am a property manager and rent a condo for an owner. I collect the rent and send the owner funds minus commission. I sent the owner a 1099 for gross rent collected and a separate statement itemized expense of repairs and commission paid for the year. I am putting commission as my income but do I need to expense the rent I sent the owner because of the 1099? If so, does rent expense fall under the commissions expense? I do not count the rent collected for the owner as my income, only the commission. I just don’t know if there is anything else to do with the 1099 and having to expense it or not?
I wish I had an easy answer for you. I’d ask an accountant these questions to make sure you setting everything up correctly.