No one looks forward to tax season. For those trying to make ends meet, it can be more than a minor discomfort. It could mean the difference between the success or failure of your business.
The good news is that, once you understand the ins and outs of tax policy and the implications for real estate ventures, you can eliminate the stress. More importantly, you can get the most out of your return.
Below is a property manager's guide to tax statements and 1099s. Keep reading to learn more about requirements for landlords and other Bothell property tax tips.
Keep Detailed Records
Maintaining accurate financial records is one of the most important things a property manager can do to prepare for tax season. These include information related to rent, fees, security deposits, and other payments made by tenants. It also includes expenses, such as:
- Maintenance costs
- Property improvement costs
- Insurance premiums
- Paid property taxes
Keep all receipts, invoices, and bank statements. Some basic accounting practices can make tax preparation go more smoothly.
Understand 1099 Rules
Identifying the property recipients for tax statements and 1099s is another important step when preparing for tax season. In general, independent contractors and vendors who make more than $600 in a calendar year should receive a form. Federal law requires these to be issued to them by January 31 following the tax year to which it applies.
There are many different 1099 forms, but two are the most common. A 1099-NEC, which stands for "nonemployment compensation," is used to report payments to independent contractors. A 1099-MISC ("miscellaneous") is for reporting other types of income, like rent, royalties, and prizes.
Washington state does not have any specific requirements for reporting payments to independent contractors, such as filing a state 1099. However, they do require that anyone receiving a (federal) 1099 register with the Washington State Department of Revenue and pay applicable taxes.
Consult With a Tax Professional
A final strategy for staying on top of tax responsibilities for your real estate business is to enlist the assistance of an accountant or other tax professional. There are several advantages to this.
First, they can provide advice on complex issues related to landlord tax responsibilities. They might make recommendations on leveraging deductions and credits.
They also will be versed in state-specific regulations that apply to filing landlord taxes. Federal and state tax laws change over time. Having a tax professional with their finger on the pulse of tax requirements can help you get the most out of your returns and protect you from audits and penalties.
Learn More About Tax Statements and 1099s
Staying on top of tax statements and 1099s is an important part of any real estate business. Following the basic steps above, including seeking professional guidance, can go a long way toward ensuring you keep the most income possible and avoid any missteps in filling.
PMI Equitas is a comprehensive real estate asset management company in Bothell, serving North King and Snohomish counties. We offer a variety of services, including accounting and tax consulting.
Reach out to us today to discuss property tax management and other services.
