The new year is fast approaching—and amidst the flurry of snow and holiday parties, tax season can sneak up on you. Let’s make sure you’re ready!
We’ll start with 1099-MISC forms: The what, when, and how.
1099-MISC Forms: The “What”
1099-MISC forms are used to report a variety of income to the IRS. Generally, contractors and freelancers receive them from any company where they’ve been earning regular income over the previous year.
In property management accounting, they are used to report rent earned from a leased property, as well as income from contracted work. A form must be sent to each property owner or vendor that has earned $600 or more over the course of the tax year.
For example, do you work with a specialized plumber on occasion? They need one. How about a landscaper who does all your fall cleanups? They need one, too.
1099-MISC Forms: The “When”
1099-MISC forms are generally expected to be postmarked by January 31st of the upcoming tax year, per IRS deadlines; and in the past, filing with the IRS could be done at a later date. This year (and since 2017), you are required to send 1099-MISC recipient copies and file with the IRS by January 31, 2020.
As a caveat, all 1099-MISC forms reporting rent payments must be filed with the IRS by February 28, 2020, or March 31, 2020 if you file electronically. The filing deadline for most states is February 28, 2020, but some states have earlier filing deadlines so be sure to check your state regulations.
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For those already using Buildium, starting December 1st, you have early access to create 1099 batches before IRS filing becomes available on January 1st so you can start verifying tax information ahead of time, making filing faster and easier than ever.
Not much has changed regarding sending 1099s to vendors this year compared to 2018. The only modification, which took effect in 2018, is that if you don’t get a contractor’s EIN or Social Security number the amount you are required to withhold as backup was reduced to 24% from 28%.
If you plan to file more than 250 1099-MISC forms with the IRS, you still must file electronically. In accordance with Filing Information Returns Electronically (FIRE), they prefer that you eFile regardless of the number.
The IRS recommends keeping copies of filed 1099-MISC forms, or having the ability to reconstruct them, for at least 3 years following the due date of the returns. Retain copies of them for at least 4 years if backup withholding was imposed.
If you don’t file 1099-MISC forms at all, penalties range from $50 to $500 per form. Even worse, deductions tied to the income can be disallowed, too. This means that if you don’t file your 1099-MISC forms, your landlords won’t be able to claim the property expenses as tax deductions.
1099-MISC Forms: The “How”
There are a number of ways to file 1099-MISC forms: Do it yourself, hire an accountant or a CPA, or find a provider to do it for you. You can even write your own software to eFile with the IRS if you want to (though, this is probably a “next year” thing if you haven’t started yet).1099-MISC forms, from A to Z: Learn the what, why & how on the #BuildiumBlog now! Click To Tweet Read more on Accounting & Taxes