Did you ever run to school and sit down only to bring out homework for the wrong class?
Tax documents are like your homework for the IRS. Bringing out the wrong ones can lead to worse punishments than a bad grade.
Read on to learn about tax statements and 1099s for Boise property managers.
What Are Tax Statements and 1099s?
A tax statement is a detailed summary of a rental property's financial activity. It tracks a specific period, usually a year.
A 1099 is a tax document used to report income other than wages, salaries, or tips. Landlords must file one for any independent contractor they pay over $600 in a year.
Types of 1099s
1099 forms can cover a broad range of payments. Knowing the right types to bring out for each situation makes reporting easier.
1099-K Form
This form is used for reporting rental income over $600 that you received electronically. Over 50% of renters pay this way.
Online payment options include rent collection apps, digital payment services, or tenant portals. They should help automate your record-keeping as well.
1099-NEC Form
This form allows you to report payments of over $600 to non-employees. These could include independent repair and maintenance contractors.
Give them one of these forms when you hire them for their taxes as well.
1099-MISC Form
This form handles income or expenses that don't fit in other rental income tax forms. They mostly apply to cash or paper checks of over $600.
These may include:
- Rental income
- Medical and healthcare payments
- Legal expenses
- Section 409A deferrals
What to Deduct
No landlord tax guide would be complete without mentioning potential deductions.
Personal expenses, fines, and the cost of filing vacancies aren't. You can take advantage of deductions for:
- Mortgage interest
- Rental property depreciation
- Property taxes
- Travel expenses
Travel to and from the property doesn't count. Look into which repairs and upgrades are considered deductible each tax period.
How to Manage Tax Statements and 1099s
One of the best 1099 preparation tips is the more information you have, the better. Get the address, TIN or tax ID number, and the amount of money paid to everyone you filled out a W-9 form for. They'll need a 1099 as well.
Make separate accounts for personal and business use. It keeps them from getting tangled together and makes you look more credible.
Keep and review careful records of all your finances. Make electronic copies of each document in case they get lost.
Automated systems reduce errors. This lessens the likelihood of an audit. It also makes the process easier and faster.
Consult with professionals about your tax statements and 1099s. A property manager can take over your financial reporting as well as tenant management, maintenance, and more.
Who Can Manage My Financial Reporting?
Tax statements and 1099s are a landlord's lifeline at tax time They keep track of everything you earn, what you spend, and who you give your money to.
Wave Property Management's success story began over a decade ago. We realized the need for a relationship with our clients based on trust and accurate, secure accounting.
Today, we've become the solution for safe and secure Boise property management at all income levels. We can help whether you're buying your first property or expanding your portfolio. Contact us today to gain a partner for your financial future.
