I own a couple of rental properties. My property manager deducts her fees before forwarding us our portion.

[carcib]

Do I report the fees that she keeps as Management Expenses? I never see the money.

Do I report the total rents collected as the rental income, even though I never saw a part of them?

She gave us a 1099MISC with income entered in Box 7 (nonemployee compensation). Turbotax didn't seem to like it when I tried to enter it, it said I couldn't report nonemployee compensation on a rental property. Any ideas why?

[AnnetteB · Accepted solution]

Yes, you report the fees that the property manager keeps as management expenses.

Yes, you report the total rents collected as rental income.  Then the portion that you never received (the management expenses) will be deducted from the total income.

An income item reported on Form 1099-MISC as non-employee compensation implies that you received the income from self-employment.  Therefore, if that is the case the income should be reported on Schedule C and be subject to self-employment tax.  The rental income should have been reported in Box 1 of Form 1099-MISC showing rental income. 

You should request a corrected Form 1099-MISC from the property manager.  If she will not provide a corrected form, report your rental income as if it had been received without a Form 1099-MISC and do not enter the 1099-MISC into TurboTax.  Keep the Form 1099-MISC and documentation that you requested a corrected form just in case the IRS questions why the 1099-MISC income was not included on Schedule C.