The American Rescue Plan Act of 2021 provides many new benefits for low-income earners, but it also impacts tax laws for landlords from 2024 onward. Under the new laws, any third-party provider, such as a property manager, who transfers more than $600 to a landlord must provide them with the relevant Form 1099.
This is a big jump from the previous threshold of $20,000 or 200 transactions, so there's bound to be a little confusion initially. What's more, different 1099 forms apply to different payment providers.
Read on to discover what you need to know about tax statements and 1099s, so you can answer any questions your landlords might have.
This is what you need to know about tax statements and 1099s to help your clients calculate their taxes.
Tax Statements and 1099s: The Basics
Tax statements are property tax documents that detail the income and expenses associated with a rental unit. These documents should correspond with information recorded on 1099 forms provided by payment apps, bank statements, or your records.
As a property manager, it's helpful for you to manage 1099s for landlords on behalf of your clients, as you have first-hand knowledge of income received.
There are two kinds of 1099 forms applicable to landlords. These are:
- 1099-K for payments via credit and debit cards or electronic transfers
- 1099-MISC for payments received via cash or check
A third type of 1099 form, 1099-NEC, applies to payments made to contractors or other vendors for services rendered. If you've paid more than $600 for maintenance and repairs to a contractor on behalf of your landlord, you must fill out a 1099 for that contractor.
Filling Out Tax Forms
You must fill out every blank space on the tax statement and 1099 form. You'll need the following information to get started:
- Taxpayer's ID number
- Recipient's address
- Total amounts paid for the tax year
The IRS website has an explanation about how to fill out 1099 forms and more detailed instructions about submitting taxes correctly.
A Schedule E form is an important part of this process, as it details income, expenses, and profits. This is similar to the information contained in monthly owner statements, so be sure to keep copies of these documents.
The Schedule E form is vital for landlords to calculate their tax obligations for the year. Landlords can deduct the following expenses to help reduce their tax burden:
- Property management fees
- Property taxes
- Maintenance and repairs
- Utilities
- Insurance premiums
You should provide your clients with all the necessary paperwork to prove these expenses, but they should contact a tax professional for help when calculating their taxes.
These experts are skilled at discovering legitimate deductible expenses that the average taxpayer is unaware of.
Maximize Profits With Kansas City Property Management
Completing tax statements and 1099s depends on detailed, accurate accounting records. A Kansas City property management firm can help landlords avoid the typical last-minute rush associated with tax time.
PMI Fountain City's property management team is well-versed in the new tax laws and ready to support our clients through this transitionary phase. We can help you sail through the intricacies of tax statements and 1099s thanks to our accurate record-keeping and high attention to detail.
Browse our blog for more property management tax tips and more, or get in touch for assistance.
