The American Rescue Plan Act of 2021 introduced a few new tax laws into the fold for the 2024 tax year. Most importantly, it represents a clampdown on unreported income received from third-party payment providers.
If you use a property management app to pay your owners their rent every month, you need to complete a 1099 form to help your landlords complete their tax returns.
The new threshold for landlords is $600 per year, with a phase-in amount of $5,000 for 2024. This represents a huge drop from the previous limit of $20,000, so it's bound to affect most landlords.
It will take some time for property managers and landlords alike to become accustomed to these new procedures, but they aren't difficult to master.
Read our property management tax guide for insights into how to handle tax statements and 1099s.
Basic Information About Tax Statements and 1099s
Property tax statements reflect rental income, expenses, and net operating income for each property. In this regard, they're closely related to owner statements.
Each landlord's tax statement must correspond with the information reflected on their bank statements and 1099 forms. Two types of forms are relevant when sending 1099s to landlords. These are:
- Form 1099-K for credit and debit card payments as well as electronic transfers
- Form 1099-MISC for payments via cash and check
As part of your maintenance coordination service, you probably pay some contractors on behalf of your investment property owners. You must fill out a 1099-NEC form for each of these vendors if you pay them more than $600, or $5,000 for 2024.
Tax compliance for property managers doesn't involve much more than that regarding your responsibility to your landlords. Accurate record-keeping will simplify this procedure and streamline 1099 filing for your landlords.
Filling Out 1099s Correctly
Each 1099 contains a few mandatory sections. You'll need to complete the following parts of the form:
- The taxpayer's ID number
- The 1099 recipient's address
- Total amounts paid over for the relevant tax year
The IRS website has more detailed information about how to fill out these tax forms.
Once your landlord receives these documents from you, they use the information to complete a Schedule E form detailing their income, expenses, and profits for the year.
Some of these expenses are tax-deductible, e.g., property management fees, landlord insurance, property taxes, utilities, and maintenance costs. Again, your landlords will benefit from accurate record-keeping to ensure they don't pay too much tax.
If your landlords require further assistance calculating the amounts owed, it's best to refer them to a qualified tax professional for assistance.
Effective Property Management in Denver, Colorado
PMI Aspire is your partner in effective tax compliance. Our team is led by a licensed broker with over twenty years of experience in the local real estate industry.
We use the latest technologies and property management software for accurate record-keeping and to ensure our landlords receive their tax statements and 1099s in good time for the tax season.
Browse our blog for more property manager tax tips or get help navigating the new tax threshold for landlords in Denver, Colorado.
