Did you know that filing your taxes too early is a common tax return mistake that can cost you? While it's great to be prepared, it's important to wait until you have all of the correct documents.
You also may fear not filing your taxes on time. You can eradicate this fear by prepping for tax season early on. Keeping tabs on your investment throughout the year is the easiest way to file your taxes effectively.
Still, there are other things landlords in Hooper, Utah should know about tax statements and 1099s. Keep reading to learn them.
Track Expenses Regularly
Prepare for tax season in advance by regularly tracking your expenses. Keeping careful records of your expenses will help you reduce your tax liability.
Necessary and ordinary expenses are deductible, including:
- Repairs, maintenance, and cleaning
- Advertising and marketing
- Rental property insurance
- Mortgage interest
- Rental property management fees
- Property tax fees
Use rental property accounting software to track tax statements and 1099s.
Use the Correct Forms
There are different landlord tax forms to be aware of before you file taxes. Individuals report income and deductions on a Schedule E form under Supplemental Income and Loss.
You'll use Form W-2 to pay employees you hire part-time or full-time.
To report depreciation, use Form 4562: Depreciation and Amortization. Most importantly, file the proper 1099 forms and request a Form W-9 from employees or contractors.
Form 1099-MISC
Form 1099-MISC can be used to report rental income collected as cash or checks from tenants. Some landlords choose to only take online payments to avoid having to report this type of income.
If you have partners, you'll use this form for owner disbursements that total more than $600.
Form 1099-NEC
Form 1099-NEC is used to pay contractors and repair people. Many landlords choose to outsource maintenance tasks to ensure they stay compliant with habitability laws in Utah.
When you utilize these services, you need to report the expenses to the IRS. Some of the most common contractors you may hire as a landlord include:
- Plumbers
- HVAC contractors
- Locksmiths
- Cleaners
- Laundry services
1099-NEC Forms are only required if the total payment to a contractor is $600 or more in the given tax year.
Form 1099-K
Property tax management is much easier when you require tenants to pay rent via an online portal. One of the best 1099 preparation tips is to find a payment service that automatically creates 1099s for you.
No matter the online payment platform you use, you'll need to file Form 1099-K to report the income.
Understanding Tax Statements and 1099s
Tax compliance for property managers and landlords can be complicated. With the right facts and tips, you can prepare for tax season without the hassle.
PMI Northern Utah is a full-service real estate asset management company providing the highest quality services and technology. We have a specialized accounting staff to help investors maximize income and minimize expenses.
We keep your financials in order through rent collection, owner disbursements, and, of course, tax statements and 1099s. Keep tabs on your investment with our comprehensive financial reporting process.
Contact us today to get started.
