Property managers are going to be busy in 2023. In keeping with our 2023 Property Administration Trade Report, 92% of property managers we surveyed plan to increase their portfolios within the subsequent two years. Given the present financial local weather, they’re wanting to try this by discovering artistic, tech-led options to streamline their companies whereas looking for out new purchasers.
With a lot on the horizon for property managers, property administration tax reporting, could also be the very last thing on their minds. Nevertheless it’s nonetheless an important a part of 2023 planning.
That’s why we’ve created a information to assist make the 1099 submitting course of as clean as attainable.
Let’s dive into what it’s essential know in regards to the 1099-MISC and not too long ago launched 1099-NEC types, so that you’ll be arrange for fulfillment in 2023:
What Are 1099-MISC and W-9 Types?
The IRS makes use of the 1099-MISC to report quite a lot of earnings acquired that isn’t reported on customary W2 types. Whereas non-employee compensation is now filed underneath the 1099-NEC (we’ll get to that later), you’ll nonetheless must file a 1099-MISC for:
- Lease earnings
- Prizes and awards
- Money paid from a notional principal contract to a person, partnership, or property
- Fishing boat proceeds
- Medical and well being care funds
- Crop insurance coverage proceeds
- Funds to an legal professional
- Part 409A deferrals
- Non-qualified deferred compensation
- Different earnings funds
For property administration tax submitting, that signifies that 1099-MISC types are the first methodology to report:
- Lease supplied to an proprietor from a leased property totaling $600 or extra
- Lawyer charges totaling $600 or extra
Every time a property supervisor brings on a brand new proprietor or regulation agency they need to request a W-9 kind. The W-9 kind provides you with their submitting standing and federal tax ID, so you possibly can file your 1099-MISC types precisely when the time comes.
Property managers are required to request a W-9 from and concern a 1099-MISC kind to every proprietor, legal professional, and contractor they work with, as long as funds meet or exceed the $600 threshold. The IRS makes (usually small) changes to the 1099-MISC kind annually. For 2022, the shape seems like this:
What Is a 1099-NEC kind?
In 2020, the IRS started requiring companies to report non-employee compensation in a separate kind, the 1099-NEC. We’ve created an in depth breakdown of the shape and what it means for property managers right here, however right here’s the fundamentals of what you must know:
Property managers should file a 1099-NEC once they pay an unincorporated unbiased contractor $600 or extra in a yr for work achieved on a rental property proprietor’s behalf or instantly for the supervisor’s personal enterprise. You’ll must ship a 1099-NEC as a substitute of a 1099-MISC if you happen to made a cost:
- Of no less than $600 to a person or group in the course of the yr
- To anybody who isn’t an worker (this may be a person, a partnership, an property or, in some circumstances, an organization)
- For providers supplied as a part of your enterprise (together with to authorities businesses and nonprofit organizations)
For property managers, these standards usually boil right down to funds made to:
- Upkeep suppliers equivalent to landscapers, plumbers, and HVAC professionals
- Service suppliers equivalent to locksmiths, laundry and dry cleansing, or health instructors
It’s all the time a really useful apply to seek the advice of a tax skilled if you happen to’re uncertain whether or not a specific cost falls into the appropriate class for a 1099-NEC. To offer you an concept of what to anticipate, the shape for 2022 seems like this:
1099 Exemptions for Property Managers
There are just a few eventualities during which property managers are exempt from submitting a 1099. As talked about earlier, 1099s aren’t required for any funds lower than $600.
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If the rental property proprietor is established as an organization, you don’t want to file a 1099-MISC kind for funds made to that firm. You’ll nonetheless must file a 1099-MISC if the property proprietor is a restricted legal responsibility firm, or LLC, nevertheless.
You additionally don’t must file a 1099-NEC kind for any upkeep work or different providers achieved by an integrated enterprise. Once more, this exemption doesn’t apply to LLCs.
1099 Necessities for Property Homeowners
In the event you personal the property you’re managing (a non-public landlord), you don’t want to file a 1099 for any work associated to that property. This has been the case for the reason that reporting necessities throughout the Reasonably priced Care Act and Small Enterprise Jobs Act have been repealed in 2011.
When figuring out if a sure cost must be reported on a 1099, it’s all the time a good suggestion to satisfy with a tax skilled to be sure you are submitting accurately and to keep away from any penalties.
Deadline for 1099 Types
The submitting deadlines for 1099-MISC and 1099-NEC types rely upon the way you’re submitting and what info you’re offering within the types. Check out the desk under to find out when you must file:
All of your 1099 types have to be submitted collectively, together with one copy of Kind 1096, the IRS equal of a canopy letter. You may receive an authentic Kind 1096, 1099 types and some other official tax paperwork (photocopies received’t work) from the IRS instantly via their website.
1099-MISC and 1099-NEC Submitting Choices for Property Managers
You will have a number of choices when submitting 1099 types. You are able to do it your self, both by mailing the paperwork in particular person or electronically via the IRS’s Filing Information Returns Electronically (FIRE) system or you possibly can rent an accountant or a CPA to do it for you.
It’s nearly all the time simpler, nevertheless, to file 1099s electronically (eFile) and the IRS requires you to take action if you happen to’re submitting 250 or extra 1099-MISC types.
It’s additionally a great apply (and really useful by the IRS) to maintain copies of your 1099-MISC and 1099-NEC types for no less than 3 years (4 years if backup withholding was imposed).
eFiling via property administration software program could make every step of the method simpler, permitting you to fill out 1099s in minutes and get them postmarked the identical day. This not solely quickens the method for property managers, but in addition reduces the effort and time distributors, homeowners, and different companions should spend.
Utilizing current, purpose-built software program is usually the quickest and most cost-effective strategy to go. By Buildium’s property administration software program, you possibly can generate and ship 1099s, together with each the 1099-MISC and 1099-NEC, to all your homeowners, distributors, and contractors. Buildium additionally enables you to begin the method a complete month sooner than when submitting formally opens with the IRS, so you will get a soar on tax season.
Staying on high of tax reporting is important for any measurement property administration firm. Penalties for not submitting 1099 types can vary from $50 to $280 per kind and deductions tied to the earnings might be disallowed if you happen to fail to file, that means the homeowners you’re employed with received’t be capable of declare the property bills as tax deductions.
Fortunately, you’ve bought the data and instruments to make submitting 1099 types for property administration a breeze. A property administration software program platform can do lots of the heavy lifting and preserve you effectively forward of deadlines, so, slightly than wanting again, you possibly can deal with your enterprise targets for 2023.
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