Property Management Business

[yahma]

I hired a property management company to manage my rentals.  They collect all the rent for me and pay the expenses, repairs, etc from their trust account.  They then subtract their fee and send me the remaining net balance each quarter.

1. They are going to send me a 1099-MISC for total gross rental receipts.

2. They are going to send the contractors who performed repairs on my properties a 1099-NEC (using their tax-id number).

3. My tenants will probably send the property management company a 1099-MISC for the rents they paid.

Does all the above sound correct?  If so, how can I deduct the expenses paid for repairs and maintenance on my property if they used their tax id number to send the 1099's to the contractors?  Should I be the one sending the contractors a 1099-misc for the repair expenses?

Also, do I need to send the management company a 1099-NEC in the amount of their management fee?  This company is a small company, so I'm not sure if they are following the correct tax procedures.. could someone please verify if the above sounds like the proper procedure for a rental management company.

[Critter-3 · Accepted solution]

1. They are going to send me a 1099-MISC for total gross rental receipts.   Correct. 

2. They are going to send the contractors who performed repairs on my properties a 1099-NEC (using their tax-id number).  As they should ... lucky you don't have to do it.

3. My tenants will probably send the property management company a 1099-MISC for the rents they paid.  Only business renters will do this not residential renters and this is also correct. 

Does all the above sound correct?  If so, how can I deduct the expenses paid for repairs and maintenance on my property if they used their tax id number?  Talk to your management company ... they are doing these things on your behalf so along with the 1099 for all of the rent collected they should also give you a listing of all the expenses incurred on your behalf ... makes filling in the Sch E simple. 

Should I be the one sending the contractors a 1099-misc for the repair expenses?   NO ... the management company is already doing this. 

Also, do I need to send the management company a 1099-NEC in the amount of their management fee?  Also NO.  

[yahma]

Thank you for the quick response!

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@Critter-3 wrote:

If so, how can I deduct the expenses paid for repairs and maintenance on my property if they used their tax id number?  Talk to your management company ... they are doing these things on your behalf so along with the 1099 for all of the rent collected they should also give you a listing of all the expenses incurred on your behalf ... makes filling in the Sch E simple. 

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They sent me an itemized list of all the expenses. You are right, it does make Sch E simple.  But since they sent out the 1099's using their tax-id, is it okay that I deduct those expenses?

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Also, do I need to send the management company a 1099-NEC in the amount of their management fee?  Also NO.  

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Even if they are not a corporation, but rather a multi-member LLC, I still don't need to send them a 1099-NEC for their management fees?

[Critter-3]

NO ... because you didn't pay them ... they got the money and paid you which is why you are getting the 1099.  It would be self defeating for you both to 1099 each other. 

Now if you got the rent and you paid them for their services then you would 1099 them ... do you see the difference?

[yahma]

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@Critter-3 wrote:

NO ... because you didn't pay them ... they got the money and paid you which is why you are getting the 1099.  It would be self defeating for you both to 1099 each other. 

Now if you got the rent and you paid them for their services then you would 1099 them ... do you see the difference?

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Alright, seems to make sense.  So I would just deduct their management fee on Sch E along with all my other expenses (since they are sending me a 1099-MISC showing gross rent receipts).

[Critter-3]

Yep.

[Critter-3]

Bingo.