It’s the New Year, which means you’re going to start hearing about taxes, and a growing issue is the increasing number of fraudulent returns being filed. In one particularly disturbing recent case, an Oregon woman claimed more than $1 million in refunds by filing fraudulent tax returns. She later pleaded guilty to filing more than 200 tax returns using false wage and withholding information.
Cases like these drain resources and cost the U.S. Treasury significant amounts, so in order to help the IRS detect and prevent refund fraud, new reporting deadlines have been established to reduce the gap between when early tax returns can be filed/processed and when data from companies is due to be reported to the IRS. Notably, companies must now file W-2s and 1099-MISCs reporting amounts in Box 7: Nonemployee Compensation with the IRS by January 31 of the following year. This is a significant change from previous years when filing was due by the last day of February or by March 31 if filed electronically, and thus creates a new and urgent deadline for many small businesses, including property management companies, who need to be concerned about two key requirements of the recent changes.
First, property management companies are required to issue by January 31 a Form 1099-MISC to each unincorporated vendor who was paid at least $600 (see Form 1099-MISC instructions for specific requirements). This means that all unincorporated maintenance vendors, including plumbers, electricians, HVAC vendors, and others, who were paid $600 or more must receive a 1099-MISC. Vendor 1099s report vendor payments as nonemployee compensation and are thus subject to the new IRS filing deadline. Vendor 1099s will need to be sent to the vendors and filed with the IRS by January 31. This is a key point that property management companies need to be aware of to ensure that they meet filing deadlines.
Second, property management companies must provide by January 31 a 1099-MISC to each property owner who received more than $600 of rental income during the year (reported in Box 1). As long as the owner 1099-MISC does not also report Nonemployee Compensation in Box 7, it does not need to be filed with the IRS until the last day February, or by March 31 if filed electronically.
As a professional property management organization with over 300 offices in North America, managing $13 billion in assets, we stay current with IRS regulations and help our franchise offices make sure they are in compliance. This is also just one of many reasons why rental property owners trust and rely on the services our offices provide, which gives them peace of mind when it comes tax time.