Lets face it, most people dread tax season. It usually means a lot of work preparing year-end financial statements, getting your receipts in line, and preparing your own taxes. There are a lot of important things that property managers need to consider to get themselves ready.
One thing that many property manages often neglect to get from their clients and vendors is a W9 Form. This form is supplied by the IRS which is designed for an individual or company to report their social security number or tax id. If ever audited, the IRS will look to make sure that you have this form on file. While this may seem like an extra step, its actually designed to protect you because if someone puts down false information, they will have to answer to the IRS, not you.
Ultimately, it is your responsibility to make sure that you have this form and to make sure you are filing 1099s. If you do not, the IRS can hold you responsible for the payment of back taxes for your clients or vendors, which is definitely something that is not worth the risk.
Any company or individual who received more than $600 during the fiscal year needs to be sent a 1099 before January 31. The exceptions to this rule would be Non-Profits or Corporations. Most vendors and property owners will need to receive a 1099 at the end of each year. In essence, this is what the IRS and local governments track how much someone makes during the course of a year and its your responsibility to make sure that you process this information or you could get in trouble with the IRS.
Preparing the 1099
Fortunately, filling out the 1099 is usually fairly simple. Most management software comes with a built in feature which allows you to print the 1099s yourself with just the click of the button. Of course as an alternative, you can always have your tax account do this for you, but its usually quite expensive to do.
When purchasing your 1099 packet, it will come with several forms:
- Red Cover page- This one is what you send to the IRS.
- Copy B- This is the copy that is mailed to your client or vendor.
- Copy C- You will usually print out two copies on the C form, one for yourself and one for the state.
- Copy 2- This is also sent to your client or vendor which is designed for them to file their state tax return.
The 1096 form is completed by you which summarizes all the 1099s that were processed and it is sent to the IRS along with their copy. Similar to the 1099s, most management software programs come with a feature to automatically prepare this document for you.
Hawaii GE Tax
In the state of Hawaii, there is a special service tax called the General Excise tax that landlords are required to pay. If you own property in Honolulu or the Island of Oahu, the GE tax rate if 4.5%. Most property management companies will offer this as part of their service, although the homeowner may have to pay extra. Having done this before, its a very time consuming process. Even though it seems simple, it takes about 15-20 minutes to complete. Multiply that by 100 properties and it takes quite a while to complete.
March 25, 2014