There have been many changes in the real estate management world over the past year, from a growing single-family rental market to new talks about rent control laws in light of the pandemic.

With so much on the move, planning for 2022 can be difficult to say the least. The last thing you want is for property management tax reporting to add to that confusion. That’s why we’ve created a guide to make the 1099 filing process as smooth as possible.

Let’s take a look at what you need to know about the 1099-MISC and recently introduced 1099-NEC forms so that you are ready for success in 2022:

What is a 1099-MISC form?

The tax authorities use the 1099-MISC to report various income received that is not listed on standard W2 forms. While non-employee compensation is now filed under the 1099-NEC (we’ll get to that later), you’ll still need to file a 1099-MISC for:

    • Rental Income Awards and Awards
    • Other Income Payments
    • Cash paid from a fictitious main contract to an individual, partnership or estate
    • Fishing boat revenue
    • Medical and Healthcare Payments
    • Crop insurance yield
  • Payments to a lawyer
  • Section 409A Suspensions
  • Unqualified Deferred Reward

For property management tax returns, this means that 1099-MISC forms are the primary method of reporting:

  1. Rent issued to a rental property owner totaling $600 or more
  2. Attorney fees totaling $600 or more

Property managers must issue a 1099-MISC form to every owner and attorney they work with, as long as payments reach or exceed the $600 threshold. The IRS makes (usually minor) adjustments to the 1099-MISC form each year. For 2021 the form looks like this:

1099-MISC 2021

What is a 1099-NEC form?

Last year, the IRS began requiring companies to report non-employee compensation in a separate form, the 1099-NEC. We’ve put together a detailed overview of the form and what it means for property managers here, but here are the basics of what you need to know:

Property managers must file a 1099-NEC when paying an unincorporated independent contractor $600 or more per year for work done on behalf of a rental home owner or directly for the manager’s own business. You must send a 1099-NEC instead of a 1099-MISC if you have made a payment:

  • From at least $600 to an individual or organization during the year
  • To anyone who is not an employee (this can be an individual, a partnership, an estate or, in some cases, a company)
  • For services provided as part of your business (including to government agencies and non-profit organizations)

Source: The Association for Human Resource Management (SHRM)

For property managers, these criteria typically boil down to payments to:

  • Maintenance companies such as landscapers, plumbers and HVAC professionals
  • Service providers such as locksmiths, laundries and dry cleaners, or fitness instructors
  • COVID-related services such as deep cleaning and disinfection services

It is always a recommended practice to consult a tax professional if you are unsure whether a particular payment falls into the correct category for a 1099-NEC. To give you an idea of ​​what to expect, the form for 2021 looks like this:

1099-NEC 2021

1099 exemptions for property managers

There are a few scenarios where property managers are exempt from filing a 1099. As mentioned before, 1099s are not required for payments less than $600.

If the owner of the rental property is established as a corporation, you do not need to file a 1099-MISC form for payments to that corporation. However, you must still file a 1099-MISC if the owner of the property is a limited liability company or LLC.

You also do not need to submit a 1099-NEC form for any maintenance work or other services performed by a incorporated corporation. Again, this exemption does not apply to LLCs.

1099 Requirements for Property Owners

If you own the property you manage (a private landlord), you don’t need to file a 1099 for work related to that property. This has been the case since the notification requirement within the Affordable Care and Small Business Jobs Act was repealed in 2011.

When determining whether to report a particular payment on a 1099, it’s always a good idea to meet with a tax professional to make sure you’re filing correctly and avoid penalties.

Deadline for 1099 forms

1099-MISC: If submitting on paper, your 1099-MISC form must be postmarked and mailed by February 28, 2022. If you are submitting electronically, you must submit the form by March 31, 2022.

1099-NEC: For the 1099-NEC form, you must be postmarked and post your paper form by January 31, 2022, or submit your form electronically.

All of your 1099 forms must be filed together, along with one copy of Form 1096, the IRS equivalent of a cover letter. You can obtain an original Form 1096, Form 1099, and other official tax documents directly from the IRS (photocopies do not work) through their website.

Tips for Property Managers Filing the 1099-MISC and 1099-NEC

It’s almost always easier to electronic file 1099s (eFile) and the IRS requires you to do so if you submit 250 or more 1099-MISC forms.

It is also good practice (and recommended by the IRS) that you keep copies of your 1099-MISC forms for at least 3 years (4 years if backup withholding was imposed).

eFiling through property management software can make every step of the process easier, so you can fill out 1099s in minutes and post them the same day. This not only speeds up the process for property managers, but also reduces the time and effort that sellers, owners and other partners have to spend.

Tips for working with suppliers on 1099s

It helps to have suppliers complete a W-9 when you start working with them. The information in the W-9, including the seller’s tax ID and address, will be helpful when it comes time to fill out a 1099 for that job.

Submit 1099 Property Management Forms

You have several options when submitting 1099 forms. You can do it yourself, by emailing the documents in person or electronically through the IRS Return data electronically (BRAND) system or you can hire an accountant or a CPA to do it for you. You can also write your own software to e-File with the IRS, but it will take time and may not be a viable option until next year, if you haven’t started yet.

Using existing, purpose-built software is often the fastest and most cost-effective way to go. Buildium’s property management software allows you to generate and ship 1099s, including both the 1099-MISC and 1099-NEC, to all of your owners, suppliers and contractors. Buildium also lets you start the process a whole month ahead of when filing officially opens with the IRS, giving you a leap forward in tax season.

Staying on top of tax returns is essential for property management companies of all sizes. Penalties for failing to file 1099 forms can range from $280 to $500 and income-associated deductions can be denied if you don’t file returns, meaning the owners you work with can’t use the property expenses as a tax deduction. claim.

Fortunately, you have the knowledge and tools to make filing 1099 property management forms a breeze. A property management software platform can do a lot of the heavy lifting and keep you well ahead of deadlines, so instead of looking back, focus on your 2022 business goals.

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