During 2014 I moved out of my house and got it ready to become a rental property. I hired a Property Management Firm, and my first tenants moved in during January 2015. I recently received a 1099-MISC from the PM Firm which includes one amount, the gross rental income.
My first question is do I have to issue them a 1099 for the management fees I paid to them each month? The fees were deducted by them before sending me the net amount each month.
My second question is since they (PM Firm) receive and pay on my behalf the rental tax, should I include them anywhere on my return? I don't think so, just checking.
This is my first time dealing with rental income, any assistance is appreciated. Thank you!
You are not required to issue Form 1099-MISC to the Property Management Firm for their fees.
You can also deduct any rental expenses that you paid. The fact that the Management Company paid the real estate tax on your behalf is still considered paid by you. The same applies to any other expenses that you paid, or that were paid by management company on your behalf - they are deductible on your tax return as your rental expenses.
When going through Turbo Tax, you will be enter to enter any rental expenses, such us mortgage interest, real estate taxes, insurance (homeowners), management fees, etc. If there is an expense that is not listed, you'll be able to enter the description and an amount of your expense.
Please refer to the below link for more details on rental income and expenses:
How to prepare 1099Misc & W2
https://ttlc.intuit.com/community/forms/help/how-do-i-create-w-2-and-1099-forms-in-turbotax/00/25869
You can prepare W2 and 1099NEC & 1099MISC in either the Desktop Home & Business program or the Online Premium version.
For Online Premium:
Sign in to TurboTax.
Select Tax Home from the left menu (you might already be there).
Scroll down and select Your account.
Select Create W-2s and 1099s.
This will log you in to Quick Employer Forms.
Follow the instructions to create forms online for your employees or contractors.
You are not required to issue Form 1099-MISC to the Property Management Firm for their fees.
You can also deduct any rental expenses that you paid. The fact that the Management Company paid the real estate tax on your behalf is still considered paid by you. The same applies to any other expenses that you paid, or that were paid by management company on your behalf - they are deductible on your tax return as your rental expenses.
When going through Turbo Tax, you will be enter to enter any rental expenses, such us mortgage interest, real estate taxes, insurance (homeowners), management fees, etc. If there is an expense that is not listed, you'll be able to enter the description and an amount of your expense.
Please refer to the below link for more details on rental income and expenses:
Oh good, thank you.
Regarding the City rent tax, I should then report it as income as well as expense, correct?
The first tenant broke the lease and moved out. The place was a mess and we had to have quite a bit of work done before my 2nd tenants could move in. Those expenses were paid by me (through the management co), then billed to the tenants who broke the lease. Eventually the management co was able to get all but a small amount reimbursed from the tenant. My net expense for that whole thing was under $40. Is it necessary to report any of that?
Just remembered that I received a non refundable pet deposit from the second tenants. Management Co did not include that as income, I believe they should have because it's mine to keep. Correct?
It's unfortunate (and a bit unsettling) that TurboTax Deluxe says that paying a property management company "can require Form 1099-MISC".
My 'new' tenant paid my property management company the rent(for January 2021) at end of December 2020 but I didn't get the final disbursement(after some fees) until 1~2 weeks into January 2021. My 2020 1099-misc has the gross rent that the 'new' tenant paid to my property management company.
1. My prop management company got the money in 2020 but I got my money in 2021
2. The money I got was less than what's in Box 1 in my 2020 1099-misc due to management fee and other fees
How should I go about this ?
Unless your Rental Activity is reported as a 'Business' on Schedule C (rather than an 'Investment' on Schedule E, you don't need to issue a 1099-Misc to your property manager.
Enter the 1099-Misc exactly as received.
If the property manager included it on a 2020 1099-Misc, the income reported is considered 'constructively received' in 2020.
Report the property management fees, and any other expenses the property managers deducted from the Gross Rents reported on the 1099-Misc as 'Rental Expenses'.
Click this link for info on How to Enter Rental Property Income and Expenses.
By the way, I also paid below two items for my rental:
1. HO-6 home insurance
2. Rental tax(NOT property tax) by my city
Can they be deducted as expenses ? If so where should I enter them in TurboTax Premier ?
To enter your rental:
Tip: Rent is considered income in the year you received it, not the year it applies to. This means that a rent payment for the month of January 2021 collected in December 2020 is reported on your 2020 return.
In my case, the property manager is an individual, am I required to issue a 1099-NEC to my property manager?
You should file form 1099-NEC to report the payments to your property manager since you are reporting payment for services.
To follow up on this: is it possible to e-file form 1099-NEC for property management fees paid to individual via TurboTax Premier?
If you are using TurboTax Desktop, you will need TurboTax Home & Business to create and Efile a 1099-NEC.
Here's how to upgrade once you have started your return.
If you are using TurboTax Online, you can use TurboTax Premium to prepare W-2's and 1099's.
Here's more info on How to Create W-2's and 1099's in TurboTax.
How to prepare 1099Misc & W2
https://ttlc.intuit.com/community/forms/help/how-do-i-create-w-2-and-1099-forms-in-turbotax/00/25869
You can prepare W2 and 1099NEC & 1099MISC in either the Desktop Home & Business program or the Online Premium version.
For Online Premium:
Sign in to TurboTax.
Select Tax Home from the left menu (you might already be there).
Scroll down and select Your account.
Select Create W-2s and 1099s.
This will log you in to Quick Employer Forms.
Follow the instructions to create forms online for your employees or contractors.
Thanks. However, the linked article states: “If you're a business owner…”, which I am not. But I’ll check it out.
Yes. If you own rental property and paid real estate management fees to manage your property, you may deduct management fees using Turbo Tax Premier if you report your rental property income and expenses. You do not need to issue a 1095 NEC to the management company or individual managing your property.
Thanks for your response.
I assume you mean 1099-NEC, not 1095.
It's really difficult to find a clear answer if a 1099-NEC needs to be filed for property management fees paid to a property manager. On his W-9 the manager selected tax classification "Individual/sole proprietor or single-member LLC".
Is that sufficient to conclude that I don't need to file a 1099-NEC?
The handling of rental income and expenses in TurboTax is clear to me, I have done that in the past.
Thanks.
In reviewing IRS rules, you would issue a 1099 NEC if you paid more than $600 to an independent contractor if you have a business and registered as a business that requires a Schedule C filing. If you report on Schedule E, then you do not have a 1099 NEC reporting requirement.
This does not mean you are prevented from filing a 1099 NEC. For an example, it is suggested that you issue a 1099 NEC so that you may qualify for the QBI deduction on your tax return. This Turbo Tax article gives an explanation that you may qualify for QBI if "you’re a real estate professional for tax purposes (that is, over 50% of the personal services you performed in business during the tax year were in a real estate business you materially participated in for more than 750 hours that same year) then your rental income qualifies for the QBI deduction". You do not need to file a business tax return to qualify for QBI in this instance.
To summarize, you do not need to file a 1099 NEC but you are not prevented from doing so. The W9 by the a management company get your correct name and TIN and assumed you operate a business. It may be a good idea to file a 1099 NEC but you are not required to do so.
Yes, I erred in my previous post. I did mean a 1099 NEC and not a 1095. I apologize for that mistake.
Hi @DaveF1006, Thanks a lot for your detailed answer!
In my case I paid more than $600, do not have a business, and report on Schedule E. So from your answer I am concluding that I don't need to file a 1099-NEC, but can choose to do so.
If I may ask then about TurboTax Premier (online): I looked at the description how I could file such a 1099-NEC and tried it out (without saving), but it requires me to set up a record for me as a business (it has the option of using my SSN for that). So for now I gave up on that as I'm not sure if that is the right way to do it.
I did find other online options, but if TurboTax could handle this for me, I would prefer that.
Yes, you can create/e-file/print Forms 1099-NEC using TurboTax Quick Employer Forms. You pay for that product by adding it to your TurboTax account through that link. You would use you social security number as a tax ID on the forms.
For rental property owners using Schedule E as stated by @DaveF1006 you do not have to file forms 1099 typically as those properties are typically treated as investments. However, if you are electing to take the 20% qualifying business income deduction from your rental income, you are considering your rental, a business, and therefore would have a requirement to file 1099's if you paid $600 or more to a business entity.