The American Rescue Plan Act of 2021 brings major benefits for low-income earners across the USA, but it has also led to changes in real estate tax reporting for landlords.
From 2024 onwards, landlords must declare all income earned from rentals if it exceeds $600 per year. To complete their tax returns correctly, they'll need the correct 1099 forms detailing their earnings.
As a property manager, it's your responsibility to provide them with this important document. Read on for more information about how tax statements and 1099s work.
Tax Statements and 1099s: The Basics
All property managers must provide their landlords with tax statements every year. Like monthly owner statements, they're standard forms detailing all the income and expenses associated with their property portfolio.
Additionally, anyone who pays a vendor over $600 annually must provide them with a 1099 form so they can complete their taxes accurately. For property managers, both landlords and maintenance professionals may fall into this category.
For landlords, property managers should use a 1099-MISC form to detail any payments made, while 1099-NEC forms apply to payments made to contractors on behalf of your landlords.
A third form, the 1099-K form, applies to payments made via credit or debit card and electronic transfer.
All the information recorded on a 1099-MISC form should be supported by corresponding information on the owner's tax statement. Be sure to cross-reference these amounts with bank statements, your accounting records, and payment apps.
Filling Out the Necessary Tax Forms
Accuracy is paramount when completing 1099 forms on behalf of your landlords. Be sure to fill in all the blank spaces, and make sure you include the following information:
- Taxpayer ID
- Recipient's address
- Total amount paid for the relevant tax year
The IRS website has detailed instructions about filling out 1099 forms for landlords, so they have all the information they need.
Schedule E forms are also important for submitting taxes correctly. They're also similar to owner statements and include information about profits, expenses, and income.
The expenses section is key to reducing landlord tax obligations, as it may include many tax-deductible items, like the following:
- Property management fees
- Property taxes
- Utility payments
- Repair and maintenance costs
- Insurance premiums
You can find the information you need about these expenses using invoices, owner statements, and bank statements, or create a custom report using property management software.
By including as much information as possible, you're helping your client's tax preparer identify additional tax savings and offer tax-season advice.
Tax Assistance for Landlords
Property managers can play an important role at tax time by helping their landlords stay compliant with prevailing tax laws. Precise record-keeping helps tax professionals identify savings and submit taxes accurately.
PMI Lynchburg assists our landlords with expert record-keeping and accounting services and can also offer property management tax tips when needed. We have over 20 years of experience in property management and place a high emphasis on using the latest technology to provide premium services.
You can count on us to provide you with accurate tax statements and 1099s every year, regardless of changes in the tax laws. Let us help you navigate tax time more easily this year.
