1099 Tax Requirements

Besides actually paying your taxes, one of the biggest tax-related stresses for property managers involves 1099-MISC reporting. The IRS requires property managers to issue a 1099-MISC tax form for any service or owner who receives more than $600 related to their rental business.

1099-MISC Tax Deadlines for 2020 Filing

This tax season, managers are required to provide a 1099-MISC to recipients by Jan. 31, 2020 and to the IRS by January 31, 2020,  for e-filing and paper filing, if there is information in Box 7.

If there is no information in Box 7, 1099-MISC forms are due to the IRS on February 28, 2020, for paper filing and March 31, 2020, for e-filing. 

Remember, 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.  It’s always recommended that you speak with your accountant or a tax professional with specific questions about your taxes and upcoming deadlines.

What Does the IRS Use 1099s for?

The IRS relies on 1099s to monitor outside income sources that are not recorded on a traditional W-2 form. 1099s are thus necessary because W-2 forms only report on salaries and wages, while miscellaneous income is reported on a 1099 form. This means that 1099s are a 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 Needs a 1099-MISC Form?

  • Owners – A property manager must use a 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. This can include:
    • repairmen
    • plumbers
    • carpenters
    • landscapers
    • Attorney fees to handle an eviction or collect unpaid rent (even if the legal services were provided by a corporation).  

Essentially, managers must file a 1099-MISC form for anyone they paid more than $600 to in the course of a year that is NOT a corporation. 

What Info Do I Need to File a 1099?

For each individual you will file a 1099 for you will need: 

  • Tax ID Number– This is a social security number (SSN) for individuals. You will need the employer identification number (EIN) for businesses.
  • Address – This ensures that a copy of the 1099 can be sent to the recipient, for their tax reporting requirements.
  • Funds Paid – You will need to know the cumulative amount of money issued to the individual during that tax year.

How Do I File 1099s for my Property Management Business?

The simnpliest way to file your 1099s with the IRS and send them out to recipients is to do so electronically, or e-file. You also have the option to mail 1099 Tax Forms to the IRS, however, any business that submits more than 250 1099-MISC Forms must file electronically. 

Property management software makes it easy for property managers to complete 1099s and meet your tax reporting requirements. Your property management software should always have integrated accounting features that records owner and vendor payments made throughout the year and will generate easy-to-read reports summarizing your vital 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.  

For instance, this how-to video shows just how you can use Rentec Direct to e-file your 1099s.

Are There Times When Property Managers Don’t Need to File a 1099?

There are a few exceptions to the 1099 requirements. 

  • Owner Payment Exceptions: If the payee is a corporation, 1099s do not need to be filed. Therefore, if a corporation owns a rental property, you do not need to submit a 1099 Form regarding payments made to the corporate owner.  
  • Vendor Payment Exceptions: If you hire an incorporated business, instead of an unincorporated independent contractor to perform a service (such as maintenance or a repair) on a client’s rentals, you do not need to submit a 1099 Form.

Note: These exceptions are only applicable for corporations, they do not apply to limited liability companies (LLCs). LLCs are very popular with both rental property owners and maintenance vendors and DO require a 1099 Form. 

What Are 1099 Requirements for Rental Owners?

If you self-manage the 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.*   

*That said, 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.