Owner 1099-MISC for Rental Property Managers

by Jerry Fernholz Rentables Founder and CEO
Jerry is a rental property investor who founded Rentables out of frustration with the tools available to local property managers. He is obsessed with streamlining the property management process through... More
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DISCLAIMER: Rentables does not provide Tax or Legal advice. Consult your Tax or Legal professional for advice regarding your specific situation.

Do I have to file 1099s for my rental property owners?

The end of the year is quickly approaching and a common question at tax time is whether or not residential property managers need to file a 1099-MISC for their owners.  The short answer is Yes. According to the Instructions for Form 1099-MISC payments of rent to real estate agents are exempt, "But the real estate agent must use Form 1099-MISC to report the rent paid over to the property owner."

IRS Example 5 (link): G is a rental agent who manages certain rental property on behalf of property owner H. G finds tenants, arranges leases, collects rent, responds to tenant inquiries regarding maintenance, and hires and makes payments to repairmen. G subtracts her commission and any maintenance payments from rental payments and remits the remainder to H. With respect to payments to repairmen, G is performing management or oversight functions and is subject to the information reporting requirements of section 6041. With respect to the payment of rent to H, G is subject to the information reporting requirements of section 6041 regardless of whether she performs management or oversight functions or has a significant economic interest in the payment. See §1.6041–3(d) for rules relating to rental agents. See §1.6041–1(f) to determine the amount that G should report to H as rent.

 This example makes it clear that, as a property manager, you are required to report rents collected on behalf of your property owners on Form 1099-MISC, as well as, file 1099-MISC for payments made to repairmen or other vendors.  Rentables® makes it easy to generate the information you need to complete 1099s.  With a simple click you can download a spreadsheet with all the information you need.  No digging through files or trying to figure out how to export from your accounting software - just a simple click.

IRS Form 1099-MISC

How to fill out 1099 for property management? What amount do I put for Rents in Box 1 on Form 1099-MISC?

So you have to send 1099s, but what number should you report: gross rents, rents less management fees, rents less fees and expenses?  In general you should be reporting gross rents.  This means you should not subtract your management fees or any repairs or maintenance expenses.  The rental property owner will deduct these expenses on their Schedule E (Rentables provides a Profit and Loss statement that makes completing Schedule E simple for your owners).

IRS § 1.6041-1(f) Amount to be reported when fees, expenses or commissions are deducted—(1) In general. The amount to be reported as paid to a payee is the amount includible in the gross income of the payee (which in many cases will be the gross amount of the payment or payments before fees, commissions, expenses, or other amounts owed by the payee to another person have been deducted), whether the payment is made jointly or separately to the payee and another person. 

 But I don't use a trust account, I just forward checks

In general, it does not matter whether or not you deposit rent payments in a trust account or forward the money directly to the property owner.  As a property manager and real estate professional, you are required to file 1099s for your owners and for vendors to whom you pay more than $600.  For additional information see IRS Regulation 1.6041-1 or contact your tax or legal professional.

What is the deadline for filing 1099s?

In general you must provide your owners and vendors with 1099s by January 31 and copies to the IRS by Feb 28. See http://www.irs.gov/pub/irs-pdf/i1099gi.pdf for additional details or contact your tax professional.

Where can I get 1099 forms?

You can order 1099s directly from the IRS (here).  Also most office supply retailers carry 1099 forms as well as the software needed to print those forms.  Rentables conveniently exports all the information you need to a format that can be read by most 1099 printing software.

Summary

Year end accounting and generating owner statements can be a stressful time for property managers and their bookkeepers.  Rentables makes your job easier.  With Rentables residential propery managment software you can skip the headache and easily gather the information you need to properly file 1099s for your owners and vendors.  Remember, for your owners you should be reporting gross rents, not net proceeds paid to the owner.

Still have questions on how to fill out a 1099 for property management? See the 1099-MISC instructions on the IRS website.

DISCLAIMER: Rentables does not provide Tax or Legal advice. Consult your Tax or Legal professional for advice regarding your specific situation.

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