Landlords, remember that April 15th is not the first deadline of the tax season – it’s actually January 31st! If you are an owner of a U.S. rental property you may need to file:

1. Form W2 if you had any employees during the year. There are very limited exceptions for filing a W2, so we recommend to file one for ANY employee you paid during they tax year.

2. Form 1099-NEC for each ‘independent contractor’ that you paid $600 or more to ‘in cash’ during the year.

What is an ‘independent contractor’?
This is any person/business that is not a C or S Corporation. A sole proprietor or an LLC that has not elected S Corporation status would be considered an independent contractor.

What is ‘in cash’ mean?
This means you paid for services by cash, check, or direct deposit. You do NOT need to file a Form 1099-NEC if you pay an independent contractor by an online service like Venmo, PayPal, credit card, etc. This is because the processor will issue a 1099-K to the contractor that will include what you paid to them. Make sure these payments are marked as service/business related if you see that option during the payment process.

I pay a property manager to manage my property. Why would I need to file a 1099-NEC?
You normally do not need to worry about filing Forms 1099 for any rental expenses paid through your property manager as they should be filing the 1099’s, BUT if you have paid any contractors directly (for example: landscaping, fertilizer service, pool maintenance,
repairs/renovations managed/paid by you, etc.) you will need to file any 1099-NEC’s required.

How do I file Form 1099-NEC? First, request your contractor to fill out a Form W9 (remember if they mark on Line 3 that they are a ‘C Corporation’ or an ‘S Corporation’ you don’t need to file a 1099-NEC!). This form will give you all the information you need to complete the Form 1099-NEC if needed. You can then file free through the IRS system or pay an online service like https://www.efile4biz.com/ (There are other services out there. This is just one that we have used personally in our firm.)

IMPORTANT: If you file through the free IRS system, you are still required to file the 1099 with the state and send the copy of the Form 1099 to the contractors. The online services will normally take care of these steps for you and the fees you pay are deductible as a rental expense.