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Anonymous
January 22, 2021
Question

How does Property Management Company report Gross Rents on 1099-MISC with 1099-Ks Involved?

  • January 22, 2021
  • 1 reply
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It is my understanding that a Property Management Company must send a 1099-MISC for GROSS income even if only a portion of the gross income was sent directly to an individual property owner (i.e. NET income for the individual is not reported on the 1099-MISC).

 

What happens if part of the income from Property Manager to Owner is sent via a Payment Settlement Entity (PSE) that issues a 1099-K? Does Property Manager issue a 1099-MISC for the difference? That is, PSE reports net income sent to owner and Property Manager reports 1099-MISC for essentially all the expenses paid for by Property Manager in order for 1099-K and 1099-MISC to add up to Gross Rents?

 

Example:

$1,000 Monthly Rent collected by Property Manager

–$100 Property Management Fee

–$100 Monthly Miscellaneous Expense

= $800 NET MONTHLY INCOME sent electronically through a PSE.

 

Therefore:

$12,000 Gross Annual Rent collected by Property Manager

$9,600 ($800*12) Net Annual rent sent to Owner via PSE, reported on 1099-K by PSE

$2,400 ($200 expenses*12) remaining Gross Rents reported on 1099-MISC

 

Lastly, Owner reports on Tax Return:

$9,600 1099-K income

$2,400 1099-MISC income

$12,000 GROSS INCOME

—$2,400 Expenses paid for by Property Manager

—$X,XXX Any other expenses owner incurred.

$X,XXXX Net Income Reported by Owner

1 reply

john-pero
john-pero
January 22, 2021

Let me correct your understanding.  According to the instructions for 1099MISC you only report NET rent paid to owner. In your example only 800/month or 9600 is on 1099MISC. If you pay by PayPal or credit card or other method covered by 1099-K you send nothing.

 

The owner reports, on Schddule E, gross rent 12000, expenses of any nature including 1200 property management fee and other deductions.

 

Nothing has to add up formwise.

john-pero
john-pero
January 22, 2021

And you could avoid 1099 at all by depositing all rents directly into owners account instead of your own and then bill them back for pm and other expenses. Then the owner would give you a 1099 for pm services.

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