Key 1099 Compliance Tips for Property Managers

Tax season is a notoriously stressful time for everyone, but for short-term rental managers, the challenges of 1099 compliance can make it even more frustrating. With the need to collect accurate W-9 forms, verify taxpayer information, and issue 1099 forms to both homeowners and vendors, the process can quickly become overwhelming. Ensuring compliance with IRS regulations while managing the day-to-day operations of rental properties adds an extra layer of complexity, making it crucial to stay organized and proactive throughout the year. These are the critical responsibilities that property managers have regarding 1099 forms:

• Collecting W-9 Forms: It’s essential to collect W-9 forms from all non-employee vendors and contractors throughout the year. This form provides the necessary information to issue 1099s.
• Issuing 1099 Forms: Property managers must issue 1099 forms to vendors and contractors who meet the IRS thresholds for payments. The two main types of 1099 forms discussed were:
  • 1099-MISC: Used for reporting rents paid to property owners. The deadline for providing this to recipients is January 31st, and the deadline for e-filing with the IRS is March 31st (February 28th if paper filing).
  • 1099-NEC: Used for reporting non-employee compensation, such as payments to contractors. The deadline for providing this to recipients and for filing with the IRS is January 31st.

Common 1099 Filing Mistakes and How to Avoid Them

There are several common mistakes that property managers make. Here’s what you need to know to reduce stress around tax season:

• Not Collecting W-9s from All Vendors: Ensure you collect W-9s from every vendor, regardless of whether you think they will meet the 1099 threshold.
• Incorrectly Reporting Amounts: Many property managers get confused about what value to enter in Box 1 – Rents. The correct method is to report the gross amount paid to property owners before deducting any fees or expenses.
• Failing to Verify TINs: Use the IRS TIN matching service to verify the accuracy of Taxpayer Identification Numbers (TINs) provided on W-9 forms.
• Procrastinating: Waiting until the last minute to collect W-9s and prepare 1099s can lead to errors and missed deadlines. Start the process early to ensure everything is in order before the deadline.

Step-by-Step Process for 1099 Compliance

Follow this detailed step-by-step process to ensure 1099 compliance:

1. Collect W-9 Forms: Gather W-9 forms from all vendors and contractors.
2. Verify Information: Use TIN matching to verify the accuracy of the information.
3. Calculate Payments: Determine the total payments made to each vendor and contractor.
4. Issue 1099 Forms: Prepare and issue the appropriate 1099 forms by the IRS deadlines.
5. File with the IRS and States: Ensure timely filing with both the IRS and applicable state agencies.
6. Deliver Copies to Recipients: Send copies of the 1099 forms to the recipients by January 31st.

Tips for Surviving 2025 and Beyond

To help property managers stay ahead of the game, the panel offered several tips:

• Know the Thresholds for Issuing 1099s: Make sure to report any payments over $600 to non-employee vendors and contractors.
• Handle Incorrect Filings: If you have previously reported net amounts instead of gross, correct the process moving forward and communicate changes to property owners.
• Automate the Process: Utilize software solutions like Avalara and VRPlatform to automate W-9 collection and 1099 filing.
• Stay Organized: Keep all W-9 forms and 1099 records in a secure, centralized location.
• Educate Your Team: Ensure your team is well-informed about 1099 requirements and best practices.
• Eliminate Stress by Outsourcing: Simplify year-end close altogether by working with a team of experts who can take W-9 collection, 1099 filing, tax preparation, and more off your plate.

Conclusion

Navigating 1099 compliance can be challenging, but with the right knowledge and tools, property managers can ensure they meet IRS requirements and avoid costly penalties. By following the steps outlined above and leveraging automation or outsourced solutions, you can streamline the process and focus on growing your business.

For more information or assistance with annual 1099 filings, please reach out to our team. 

Explore Additional Tax Tips: For more comprehensive advice on managing your taxes, check out our blog, Tax Reporting Tips for Vacation Rental Managers.