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Are you a property manager looking to handle New Jersey tax time more efficiently and effectively than ever? Breezing through tax season is made possible by having a standardized and efficient procedure.
Whatever process you put in place, you must ensure that you manage your tax statements and 1099s correctly. Filling out the wrong forms or failing to file can lead to professional and financial penalties. Avoid these problems by learning more about what a property manager needs to know about tax statements and 1099s in this rental property tax guide.
Tax Statements and 1099s: The Difference
Tax statements are documents that show how much money a person or entity has earned in the tax period and how much of that they owe in taxes. 1099 forms are sub-types of tax statements that record incomes outside of the usual employment setting (which uses the W-2 form). Rental property accounting and taxation largely use 1099 forms because the entire industry exists to facilitate alternative income streams.
How 1099 Forms Work
There are 22 different kinds of 1099 forms in the US tax system. 1099s are used to document sources of personal income a person may have received other than their salary.
When someone gives you a source of income, they're supposed to record it on a 1099 document (in addition to their ledgers or other systems they may use). They must then give you and the IRS a copy of that 1099 form. This is how the IRS can track what the values should be in your tax return.
This means that there are two relationships in the property management accounting environment that feature 1099s. The first is that landlords must get 1099s from their tenants, and the second is that property managers must get 1099s from their clients.
1099s for Property Managers
In this context, we're going to call 1099-MISC forms "landlord tax forms." We're giving them this name because these 1099s show the IRS how much the landlord or property owner earned in rent for that tax period (usually annually). If they received their money through PayPal or a similar third-party payment system, then they need a 1099-K instead.
As a property manager, you'll need to get a 1099-NEC form from each landlord using your services. 1099-NECs report payments made to self-employed persons or directly to independent contractors. The 1099-NEC form is important because it's also one of the forms you need to claim tax deductions as a self-employed person.
Thrive During Tax Season
Tax statements and 1099s are the main vehicles through which you deal with the IRS during tax season. Knowing your way around these forms can let you have a smooth experience every time you have to file taxes.
The first thing you need to know is that 1099s are a sub-type of tax statement, so you don't have to panic if your accountant uses different terminology. Every person has to send you and the IRS a copy of a 1099 when they pay you a form of income. 1099-MISC, K, and NEC forms are the three main ones in the property management world.
If you want more tax preparation tips from the most efficient NJ property management firm, contact PMI Prime Property today. We bring a wealth of experience and technological property management solutions for all our clients' needs.
