Welcome to part 2 of 3 in our series about tax preparations for property managers. Last week, we talked about the basics of 1099s, this week, we’ll get more into the hows. Stayed tuned for more property management accounting advice through the end of the year, and be sure to download our annual Tax Guide for Property Managers for more important tax information for 2015.
Last week, I talked about the 1099-MISC form: what it is, why it’s important for property managers, and how to file. This week, let’s talk about what else you need to do to be ready for tax season.
Why now? Because, when it comes to filing your taxes, December is a comparatively stress free month. The more you get done now, the less you’ll have to do in January.
Get tax ID numbers now!
1099-MISC forms are sent to landlords and independent contractors that you paid $600 or more throughout the tax year. In order to file with the IRS, you’ve got to include the recipient’s taxpayer ID, which you can get from a Form W-9.
The best practice is to have your new rental owners and vendors fill out Form W-9 before you start working with them. Some property managers have their recipients complete a new form every year, just in case a taxpayer ID has changed. For example, maybe your landlord decided to replace their DBA with an LLC, or maybe a vendor incorporated.
And remember, every rental owner is going to get a 1099-MISC, but vendors are different. If Eli the Exterminator was a local business last year, but this year he’s decided to open a franchise of a national chain, he may no longer need a 1099.
Reconcile your bank accounts
It’s really important that any numbers reported to the IRS are accurate. You’ll report income with 1099-MISC, and landlords will report expenses based on information that you’ve given them over the last year.
Changes to previously filed taxes can be made, of course, but an ounce of prevention is worth a pound of cure. Don’t be that guy (the one who has to tell their client they misreported an amount, which means the landlord will have to refile their taxes for the year).
The first—and best—safeguard against accounting errors is a bank reconciliation. If you’ve fallen behind by a month or two, now’s the time to catch up.
Does your client need anything special?
Property management is a customer service business, and the end of the year is a great time to show how focused you are on your client’s success.
As long as you’re talking with clients about W-9s and taxpayer IDs, find out if they need anything above and beyond the usual. For example, some folks ask for an income statement for the whole year, so it’s easier to report deductions.
Once you know what they need, consider the best way to deliver it. As the saying goes, “Give a man a fish and they eat for a day. Teach a man to fish and he eats for a lifetime.” If your property management software allows you to share reports online and your clients don’t yet have access, now is a great time to teach them how to get their own data.
This blog submission is only for purposes of disseminating information. It does not constitute legal or tax advice. No attorney-client relationship is formed by virtue of reading this blog entry or submitting a comment thereto. If you need legal advice, please hire a licensed attorney in your state.
Read more on Accounting & Taxes