As we move into the new year, many people have to begin to prepare for tax season. Taxes can be a stressful time for many people as they try to get all the documents they need in order. Owning a property can also further complicate this process.
When you manage a property, you have a little extra work ahead of you. If this is your first year filing taxes as a property manager, or if you need a refresher, keep reading. Here's everything you need to know about your tax statements and 1099s.
What is Form 1099?
Form 1099 is submitted alongside tax statements to report income that may not be otherwise claimed. Unreported income usually comprises self-employment earnings, interest, and dividends.
The IRS is strict about ensuring citizens claim all the income that they receive. Since self-employed people and other sources of income outside employers are not taxed, Form 1099 was created so people can claim those sources of income.
What Happens if You Don't Submit Form 1099?
The IRS is one of the most notorious governmental organizations in the US. Penalties from the IRS often result in audits, fines, and jail time. If the IRS spots an error when filing taxes or suspects there is unreported income, you will be audited.
The IRS will mandate that you meet with a representative from the IRS so they can review your information to ensure everything is accurate.
There are a couple of scenarios that exempt property managers from filing 1099s. If you bring in less than $600 in a year, you don't need to file one.
If you establish yourself as a corporation, you are exempt from filing one. If you are an LLC, however, you will still need to file a 1099-MISC.
Failing to Meet the 1099 Deadline
If you miss the submission date for 1099s or fail to provide 1099s to the correct recipients, there will be penalties. Intentionally missing the submission date can result in fines that range from $50 to $270 per form.
If you purposefully do not provide the correct tax forms, the fines become more serious. You will have to pay $550 per form or 10% of the income you are reporting.
Who Receives Tax Statements and 1099s?
As a business owner, you have to issue 1099s to businesses or contractors whose services you've used. Anyone that you've paid $600 or more will should receive a 1099 from you. This can include:
- Construction and landscaping
- Appliance repairs
- Pest control
- Electrical work
- Remodeling and renovations
- Attorney fees
Some businesses are exempt from filling out 1099s. If they are, have them fill out a W9 instead.
Property Management Services
Good bookkeeping can help prepare you for tax season. It can make preparing your tax statements and 1099s much simpler. File on time and make sure you submit the correct documents to avoid audits and fines.
If you want to rent out your property, look no further than Jacksonville Property Management. We have a list of comprehensive services for property owners, including tenant screening, maintenance, rent collection, and more. Contact us today to set up an appointment to learn more about our services.