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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4623
Experience:  35 years tax experience, including four years at a Big 4 firm.
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I do property management. For simplicity, lets say annually,

Customer Question

I do property management. For simplicity, let's say annually, I receive $1000 from the tenant. With the $1000, I pay $500 to the lender, $100 to the HOA, & I keep $100 for my management fee. The remainder $300 is paid to my client, the property owner.

Now it is tax time. What should I list on the 1099 Box 1 I give to my client?

How about for my own tax return? Is $1,000 my income or is $100 my income? Although unnecessary, the tenant sends me a 1099 which reports $1,000 income to me. The IRS should expect to see that I have $1,000 in income.
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

Hi and welcome to Just Answer!

What should I list on the 1099 Box 1 I give to my client?

Yes - if paid more than $600 per year.

 

How about for my own tax return? Is $1,000 my income or is $100 my income? Although necessary, the tenant sends me a 1099 which reports $1,000 income to me. The IRS should expect to see that I have $1,000 in income.

I suggest to report $1000 as your income and report all payments you made as deductions - that will be clear with IRS and will correctly represent your net taxable income.

Let me know if you need any help.

Customer: replied 5 years ago.
How much should I report on 1099 Box 1 which I give to the client? $1,000 or $300?

If I list $1,000 as my income, I need to list $900 as deductions. Is the $300 I paid to my client an "expense"?
Customer: replied 5 years ago.
Relist: Answer quality.
Expert:  Stephanie B. replied 5 years ago.

Thank you for using Just Answer.

 

The 1099s that you give to your client, the property owner, should have the gross rents received in box one. In addition, I have always made it a habit to give the property owner a summarized breakdown of all their income/expenses for the year to assist them in their income tax reporting.

 

I would suggest as well to report the total rents that you have received in as income, then report the expenses that you have paid out to everyone including your tenants. You will only be taxed on your commissions at the end but will report everything in and out.


If you need more clarification, please let me know. If I am not available at the time, I will be.

I appreciate the opportunity to assist you and I look forward to your response.

Stephanie

 

Customer: replied 5 years ago.
I wanted to do that at first. However, now looking around, see this article: http://www.trexglobal.com/property-management/rental-tax-deductions/is-rent-income-collected-by-property-manager-included-in-the-gross-income

That one seems to say that the IRS says rents collected should NOT be a part of my gross income. If that is the case, I feel like there is a high audit chance. This is because the tenant will report $1000 income to me on a 1099. If I only report $100 income on my income return, per the article, isn't that an immediate red flag as my in and out don't match? This one is confusing.
Expert:  Stephanie B. replied 5 years ago.

I do see the dilemma. However, in reading this letter ruling, it looks as though the rental funds are put into an account that is not controlled by the property manager. So, it doesn't look as though this is running through the property manager's accounts.

Customer: replied 5 years ago.
Relist: Answer quality.
Expert:  PDtax replied 5 years ago.
Now it is tax time. What should I list on the 1099 Box 1 I give to my client? I would list only the $300 due to the client.

How about for my own tax return? Is $1,000 my income or is $100 my income? I would report the $1,000 as income (which will match the 1099) and then deduct your expenses, including the $300 due to owner. Call the $300 sublease rent or just rent.

If this answers your questions, please click Accept. Thanks.

PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4623
Experience: 35 years tax experience, including four years at a Big 4 firm.
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