When Airbnb issues a 1099 to property managers, how does the Airbnb Property Manager record the money collected for their customer, the Property Owner? It's NOT income for the property manager. It's just a bunch of deposits. The property manager shouldn't receive the 1099. How does the property manager fix that on their tax return? Not showing the money is cause for an audit by the IRS, showing it is totally incorrect and cause for increased liability, implying a business with ridiculously more income than it really has.
@Aquitaine wrote:
Airbnb allows listing a property as the 'property manager' - so it's not really listed "in the property manager's name", but rather FOR the owner....
Yes, it appears as if might want to raise this issue with AirBnB since you are a property manager. If that is unsuccessful (which I would suspect it will be), then you are left with a decision as to whether or not to report the proceeds from the 1099 as income (and deduct the outflow as an expense) or simply explain the mismatch if you are contacted by the IRS.
So the property manager shows the income and then the funds forwarded to the owners are subtracted as expenses. The result is the manager retains the fee or commission.
But it is NOT income for the property manager. That's my entire issue with it.
Yes, it is income for the property manager. Every penny of it. Then what the property manager pays to the property owner is a deductible expense for the property manager. The property manager would need to issue the property owner a 1099-MISC with the amount the property owner was paid reported in box 1 of that form.
Since the money was sent from the AirBNB to the property manager and not the property owner directly then the manager MUST include it in their income and expense the pass thru to the owners as well as issuing them a 1099-misc for the rent.
Issuing a 1099 to the property owner is obvious and clear = it's the property owner's income. However, I am going to continue to challenge that it is the property manager's income, too. Are credit card companies recording ALL the money they process as their income? The management fees and the commission are the property manager's income. The money that is collected and disbursed is nothing but a short term deposit and every way I look at it, it is a balance sheet item. I don't see how it can possibly belong on the income statement. The money sent to the property owner is neither cost of sales nor an expense.
@Aquitaine wrote:
The management fees and the commission are the property manager's income. The money that is collected and disbursed is nothing but a short term deposit.......
I am not certain of the exact nature of the issue in this scenario.
Either the figure on the 1099 is reported by the property manager as income and the disbursement to owners deducted as an expense or there will be a mismatch between the figure reported by the property manager and the 1099 received by the IRS. The first method eliminates the need to compose an explanatory letter when questioned by the IRS.
Well a property manager who has the AirBNB listed in their name as the responsible party and gets the 1099 in their company name must report the income on their return and simply expense the portion going to the property owners ... this it just the way it is and it doesn't really matter as in the end the profit is on the bottom line.
Now if you don't like it then get it changed with the AirBNB so that they 1099 the owners directly.
And a CC processing company charges a fee for the service they provide in moving money from one place to another using trust accounts for banking functions ... it is not the same as your situation.
Airbnb allows listing a property as the 'property manager' - so it's not really listed "in the property manager's name", but rather FOR the owner. I asked this same question on Quora and received a response that makes more sense (link below), however, it doesn't solve the problem of actually receiving a 1099 and how to properly handle it. Recording the income does not appear to be correct and would show a business with significantly more income than it really has, which I am not sure is even legal and is likely to result in additional liability incl. much larger cost for insurance. Recording 10x the gross income one really has just doesn't seem right on any level. It's also going to look weird to the IRS to have such high revenues with proportionally extremely low net income.
@Aquitaine wrote:
Airbnb allows listing a property as the 'property manager' - so it's not really listed "in the property manager's name", but rather FOR the owner....
Yes, it appears as if might want to raise this issue with AirBnB since you are a property manager. If that is unsuccessful (which I would suspect it will be), then you are left with a decision as to whether or not to report the proceeds from the 1099 as income (and deduct the outflow as an expense) or simply explain the mismatch if you are contacted by the IRS.
@Aquitaine wrote:Airbnb allows listing a property as the 'property manager' - so it's not really listed "in the property manager's name", but rather FOR the owner. I asked this same question on Quora and received a response that makes more sense (link below), however, it doesn't solve the problem of actually receiving a 1099 and how to properly handle it. Recording the income does not appear to be correct and would show a business with significantly more income than it really has, which I am not sure is even legal and is likely to result in additional liability incl. much larger cost for insurance. Recording 10x the gross income one really has just doesn't seem right on any level. It's also going to look weird to the IRS to have such high revenues with proportionally extremely low net income.
Why would it look weird ?? This is perfectly normal for your type of business as long as you keep good records and issue the proper 1099-misc forms to the owners to show the movement of the cash flow.
I am an owner of an AIR BNB property but not the Property Manager. AIR BNB is requesting my 1099 information but should that be the tax id for the Property Manager since they are collecting income and will send a 1099 to me?
"should that be the tax id for the Property Manager since they are collecting income and will send a 1099 to me"
Most likely, yes. AirBNB needs the tax ID of the person or business that they pay the rental income to. So if rental income is deposited in/paid to an account with your name on it, that would be your tax ID they need. My response is based on rough information, as I don't know the detailed set up or arrangement between you, your property manager and AirBNB.
Thank you Carl... that makes perfect sense so now it appears that we need to have the Property Manager submit the W9 info!
I would not be so sure. My confusion here is, if AirBNB is paying the property manager the income, then why did they not ask the property manager for a W-9 instead of you? You need to clarify this and not make an assumption that my response is the absolute correct one. Since I most likely don't have the whole picture like you do, in my eyes something doesn't add up here.
I have contacted Airbnb (and VRBO for that matter) regarding this. I am waiting for a response. Airbnb's website allows for selecting different taxpayer information depending on the payout method, but if you have more than one owner you're collecting income for, that doesn't help. With some of the suggestions here the SAME income would be showing up on two income statements (and tax returns), the manager's and the owner's. It cannot be correct to show income on your taxes that's not yours. The 1099's should be going to the owners.
Here's a scenario that could apply here, which would not only be problematic, but could have the potential to flag and audit.
AirB&B collects the income. From that gross income AirB&B takes their cut and sends the rest to the property manager.
Then the property manager takes their cut and sends the rest to the property owner.
If AirB&B sends a 1099 to the property owner for the amount they paid to the property manager, it's possible that the property manager will also send a 1099 to the property owner for the amount they paid to the property owner. This means that the 1099 from the manager will include the income already reported on the 1099 from AirB&B. So the property owner is reporting a little more than double the income they actually received. While this can be "dealt with" by the property owner on their own tax return, I would fully expect it to create a much greater audit risk with the IRS. While such an audit would probably work out fine, it can (and most likely would) be a hassle for the property owner to deal with to final resolution.
I don't get ANY of this because AirBnB or VRBO is ONLY going to send a 1099 to the person or company THEY PAID. They're not going to send a 1099 to anyone they didn't pay....that would be improper and wrong and not necessary.
If AirBnB or VRBO pays the property manager....IN FULL.....and sends a 1099 to the property manager ALL the property manager has to do is deduct the payment to the OWNERS on SCH C. Then the property manager can send a 1099 to the OWNERS for the amounts they were paid. It's not that tough to figure out.
I am a property manager but I do allow all of the payments from Airbnb to go directly to the owners. I then bill them accordingly each month for the percentage agreed upon as well as all of the cleaning fees. From my limited understanding, Airbnb should then be the one issuing the 1099 to the property owners. They would then deduct my charges as an expense. I would then record only the income that I received. I would then not need to issue them a separate 1099. Does this sound correct?
That is a work around for sure; however that would take me way more time. With our software, we collect all income and pay all the expenses, take out our fee then send remainder to the Owner. AIR BNB will 1099 us and we 1099 the owners.
@Michalanne wrote:
I am a property manager but I do allow all of the payments from Airbnb to go directly to the owners. I then bill them accordingly each month for the percentage agreed upon as well as all of the cleaning fees. From my limited understanding, Airbnb should then be the one issuing the 1099 to the property owners. They would then deduct my charges as an expense. I would then record only the income that I received. I would then not need to issue them a separate 1099. Does this sound correct?
Yes, but you will want to make sure that Airbnb is actually issuing the 1099 to the owner and not to you. And there could be a need for the owner to send you a 1099 to report amounts the owner paid you, particularly if the amounts are above $600 for the year. Just FYI.
It makes sense to collect the money, take out all the expenses and send the remainder, especially because you don't have to worry about the owners not paying their bills. And it certainly appears customary to do it that way. I've run the issue - having to record income that isn't mine - by a TurboTax Expert, plus a TurboTax CPA. They both understand the dilemma but unfortunately had no solution. Apparently, Airbnb as of 2022 will issue 1099s for all funds disbursed, so you are forced to record a potentially immense amount of "income", that, if properly accounted for, wouldn't even show up on an income statement. It's a balance sheet item - the money collected is just a deposit. Only the fees are the property manager's income. Yes, it matters... I would very much appreciate feedback from some users, who also understand why this is a problem.