Do I need to issue 1099-MISC to my investment rental property manager?

[linwang]

Thank you, Surgeon92 and CalCountry for your replies. Surgeon92's response confirmed the 1099 issued by a property manager to the property owner is the full  amount of  rent before deducting commissions/fees. Now  CalCountry, do you agree that a property manager need not report 1096 on his schedule C for his business, as suggested by the response in the link you refer to? In other words, is it required to somehow show the total amount on the property manager's schedule C to match the amount of all 1099 reported to IRS?

[CalCountry]

As a "pass through" entity, the property manager must issue 1099-MISC form(s) to the property owner(s) and IRS, and submit a 1096 to the IRS summarizing the 1099-MISC form(s) issued to property owner(s).
  The rental income and expenses are not income and expenses of the property manager's business.
  Maybe here's an example:
Property manager receives $10K rent from tenants.
Property manager issues 1099-MISC form(s) to property owner(s) for $10K.
Property manager submits a 1096 summarizing & reporting $10K for all 1099-MISC form(s) issued and submitted.
Property owner(s) report rental income of $10K, and rental management expense of $1K on tax return(s).  (see note)
Property manager reports business income of $1K on tax return.

(note) The main question under discussion is whether the property owner is obligated to send a 1099-MISC to the property manager for the $1K commission.  Remember that if the property manager is a corporation, the property owner is relieved of the obligation to issue a 1099-MISC to the property manager for the commission.

[gone2vegasbaby]

Do you file a 1099 for an owner that I pay rent to (business related)--who lives out of the country?

[CalCountry]

If your payments to a property owner are "in the course of your business or trade," and they are more than $600 in a year, then yes.  However, if the party to whom you make payments is a corporation, you are exempt from the requirement to issue a 1099.  Perhaps the party to whom you pay the rent is obligated to file a U.S. tax return?  Whether or not, it couldn't hurt to issue a 1099 and report via a 1096.

[fernjunk]

I've looked into this in depth and believe you do not need to send your property manager a 1099.

Note the 1099 your property manager sent you should have shown $10k in rental income (total collected not the amount disbursed).

Your Schedule E should account for the $1k in management fees.

See [external link removed] for an indepth post with references to the appicable IRS code.

[pecosita-1]

Good answer.  But what about a prop management company that sends a 1099-Misc showing a combined amount of income from 3 rentals.  TTax won't let me divide up the amounts.  It lists the entire amount as income from 1 house.  How do I apportion it?  Help!

[CalCountry]

Here's a solution:
Assume you have properties A, B, and C.
a) Enter the 1099-MISC just as you received it, but enter only the Property A information, and only its proportionate share of rental income.
b) Then create a "substitute 1099-MISC" with the information and proportioned rental income for Property B.
c) Then create a "substitute 1099-MISC" with the information and proportioned rental income for Property C.

The process for creating a substitute for a form you did not receive is in Djay43's answer in the following thread:
   <a href="https://ttlc.intuit.com/questions/2635641-how-do-i-file-1099-misc-without-a-1099-misc" rel="nofollow" target="_blank">https://ttlc.intuit.com/questions/2635641-how-do-i-file-1099-misc-without-a-1099-misc</a>
(Of course in contrast to those instructions, instead of reporting the income as "miscellaneous income," you would create 1099-MISC's with the income as rental income.)

[TurboJake]

@fernjunk Thanks for your clarification.  I would love to see the article you posted about not requiring the property owner to issue a 1099-MISC to the property manager, but unfortunately the external link was removed.

Can you try to provide the link again or a hint at where to find the article you were trying to post?

[IsabellaG]

@TurboJake, perhaps this discussion will help. Back in 2011, the Small Business Job Act included a requirement which would have treated all rental properties as a business and required owners to issue 1099's to contractors, including property managers. But the law was repealed, so this is not a requirement for any owner who is not in the business of renting properties.  Here is a link to the Journal of Accountancy article that came out at the time. 

[Edit 12/23/2019]

[Carl]

Do I need to issue 1099-MISC to my investment rental property manager?

The bottom line answer is NO. Period. End of story.

However, the property manager that you pay "may" be required to send "you" a 1099-MISC reporting all rental income received in box 1. If box 1 shows the gross rent, then you can claim expenses on your SCH E including what you pay the property manager. But if box 1 is only the amount that you are paid after expenses, then it's perfectly possible that you will have NO rental expenses to claim other than mortgage interest, property taxes and insurance.

[Kayla-borg]

@CalCountry - When you say "corporation", does that include LLC's too? 

[KathrynG3]

@Kayla-borg LLC's do not receive 1099-MISC. 

Please see this IRS link regarding Form 1099-MISC.

[spammernaut]

I used a property management company in 2019, and they sent me a 1099-MISC form. However, it includes 100% of the RENT they COLLECTED, not merely what they paid me. They included on the 1099-MISC the commissions they kept, which seems improper to me. I never collected a dime directly from their tenant. They retained their commission and paid me only the difference (i.e. 92% of the total rent they collected each month). How do I deal with this situation? I read that I am not supposed to 1099 them, but I am NOT paying taxes on their income!

[AmyC]

You put in all the income and then expense off their commissions and fees that they kept. You will not pay tax on the income since it is subtracted.  @spammernaut

[Michele G]

LLCs are only exempt from receiving 1099-Misc forms if their tax classification is "C" or "S".  If they are LLPs or single-entity LLCs, they are NOT exempt and should receive one.  Box 3 on the W-9 should clarify the vendor's classification.  The rules are clarified in your link to the IRS website.