Rental Property: 1099-MISC vs 1099-NEC

[dday04]

Hello,

My property manager has sent me a 1099-NEC and not a 1099-MISC.  I paid the property manager for expenses such as cleaning and repair as well as their monthly commission.  TurboTax asked if I paid for work that required a 1099-NEC and I said yes.  Then TurboTax asked if income was reported to me on a 1099-MISC

Should I say yes? (I didn't receive a MISC, just a NEC)

Is this rental considered a business?

Since I said yes on the 1099-NEC, TurboTax asks if the form should be linked to a Schedule C, F, Form 8919, or other income.  Since this income is already linked to a Schedule E, where should this NEC be linked?

Thank you very much!

[JeffreyR77 · Accepted solution]

Your property manager has reported your rental income incorrectly. 

They should issue a corrected Form 1099-NEC zero-ing out the income reported on the Form 1099-NEC. 

Form 1099-NEC is used only for reporting non-employee compensation paid to an individual that exceeds $600 in a calendar year. 

The property manager then should issue a Form 1099-MISC correctly reporting the rental income collected and paid to you during the year.

While the IRS classifies a rental as a business activity, the income and expenses are reported on Schedule E, not Schedule C. 

You should not have a Form 1099-NEC but rather a Form 1099-MISC linked to a Schedule E..  

[dday04]

Thank you very much!

[OfficialAvi]

This person’s reply is incorrect. In 2020 there was new tax guidelines that property managers should use 1099-NEC NOT 1099-MISC. I believe the way your property manager gave it to you is correct. Google “1099-MISC vs 1099-NEC a property manager 2020” and you will see...

[Critter-3]

The management company still needs to report the rent paid to the owners on the 1099-MISC box 1.  The new 1099-NEC is for subcontractors they pay who work for them or on behalf of the owners they have under contract to manage.  https://www.buildium.com/blog/what-is-the-1099-NEC-for-property-managers/

[Carl]

This person’s reply is incorrect. In 2020 there was new tax guidelines that property managers should use 1099-NEC NOT 1099-MISC.

I think you're misunderstanding who paid who, and who paid that who for what.

So what exactly did the property manager, pay the property owner to "do"? The 1099-NEC is for "earned" income. The property manager passed on rental income to the property owner, and rental income is passive. The property manager issues the property owner a 1099-MISC for passive income. That's it.

[Carl]

This person’s reply is incorrect. In 2020 there was new tax guidelines that property managers should use 1099-NEC NOT 1099-MISC.

I think you're misunderstanding who paid who, and who paid that who for what.

So what exactly did the property manager, pay the property owner to "do"? The 1099-NEC is for "earned" income. The property manager passed on rental income to the property owner, and rental income is passive. The property manager issues the property owner a 1099-MISC for passive income with that income reported in box 1. That's it.

[rdefeo]

I'm confused. My property manager sent me both a 1099-MISC and 1099-NEC for 2021. Both forms indicate the same amount (the total rent for the year) in their respective Box 1. When filling out the Rental Property portion of TurboTax, it only asked for the -MISC. Do I need to enter the 1099-NEC anywhere?

[AliciaP1]

No.  You should not have received a 1099-NEC at all.  I would suggest you contact your property manager to ensure they corrected their filing and voided the 1099-NEC.

In the meantime, you should report the 1099-MISC as you have indicated.

@rdefeo

[rdefeo]

I contacted the property manager and they confirmed they sent the NEC in error and have voided the filing.

Thank you @AliciaP1 !!

[Rocko1234]

I'm still confused. I hired a property management company to manage my rental. The property management company is an LLC, not an independent contractor. I have paid them more than $600 over the year to management my rental. They sent me a 1099-MISC. Do I have to send them a 1099-NEC? 

[AliciaP1]

No, you do not.  The 1099-NEC reports payments to another person or business for services performed by someone who is not your employee that would happen in the normal course of your business. In your situation, the only time you would need to send a 1099-NEC is if your business is property management and you contracted out the management for any of your clients' properties.

See 1099-NEC qualified payment examples for a more detailed list of examples necessitating a 1099-NEC be sent.

@Rocko1234 

[Rocko1234]

Thank you. Almost fully clear.

Turbotax asks "Did you pay anyone $600 or more for work related to this property?" and it list some examples including "Property Management" and it asks again..

"Did you pay for any work on this property in 2022 that would require a Form 1099-NEC?" 

It gives 2 choices to answer this:

"Yes, I paid for work that required a form 1099."

"No, I did not pay for work that required a 1099" 

It further gives 2 more choices: 

"Yes, I issued 1099's."

"No, I did not issue 1099's."

For my situation, do I answer "Yes, I paid for work that required a form 1099" and "No, I did not issue 1099s."? 

This is what's confusing because I did pay the property management company more than $600. 

[Critter-3]

PICK NO >>>>

"No, I did not pay for work that required a 1099" 

"No, I did not issue 1099's."