According to a New York Post article, the Internal Revenue Service (IRS) levied a staggering $7 billion in tax penalties in 2023. In 2022, the total only reached $1.8 billion. Business owners were among those who took the most hit.
If you're about to become a landlord in Menifee, CA, you'll also become a business owner. For this reason, you must organize and file the proper tax statements and 1099s. If you don't, you risk getting hit by IRS penalties.
If you're unsure where to begin, don't worry. In this guide from the PMI Smarter Solutions team, we'll share tax compliance advice and insights into understanding 1099 forms.
Tax Statements and 1099s: What Exactly Are They?
Tax statements document your rental business's income and expenses. Many of the details these documents contain come from 1099 forms.
Depending on your financial transactions, you may have to use one or more of the following 1099s when filing tax forms:
- 1099-MISC form, used for rental payments received by landlords
- 1099-K form, used for payments made to landlords via online methods like PayPal
- 1099-NEC form, used for payments made by landlords (or their property managers) to contractors and vendors
In addition to 1099s, you may have to file California-specific tax forms for your Menifee property. According to the California Franchise Tax Board, they may include forms FTB 3801 and Schedule CA (540NR).
Importance of Tax Statements
Tax statements allow you to prepare and file the appropriate tax forms for your rental business, which then helps you avoid hefty fines and penalties for tax law violations.
An example of a violation is understating tax liabilities. According to the IRS, this can lead to fines of up to $5,000 or 10% of the liability that should appear on the tax return, whichever is greater. Accuracy-related errors caused by disregard or negligence also carry severe penalties: up to 20% of the underpayment.
Outsourcing Financial Management: Key to Accurate Tax Reporting
One of the most practical tax preparation tips for Menifee landlords is outsourcing their rental property's overall management to professional property managers.
For example, PMI Smarter Solutions can handle lease, tenant, and property management and assist with accounting and financial reporting. We'll also prepare your tax statements and 1099s, helping you manage your tax liabilities and responsibilities.
We'll send you all those documents through the exclusive online landlord portal we provide our landlords. You can use this portal for other integral tasks, too, such as:
- Reviewing lease agreements and tenant screening reports
- Signing documents
- Viewing fund transfers
- Filing maintenance requests
Of course, you can also contact us through the online portal for general inquiries or property management concerns.
Partner With PMI Smarter Solutions for Better Rental Management
Filing the correct tax statements and 1099s for your Menifee, CA, rental properties is imperative to avoiding tax violations and IRS penalties. So, unless you're 100% confident in your accounting, reporting, and recordkeeping skills and abilities, it's best to outsource them to experts.
PMI Smarter Solutions is your go-to for full-service property management solutions in Menifee, CA. We're a family-owned company operated by the Arces with decades of combined experience in real estate investing and managing thousands of rental units. We'll use our knowledge, skills, and expertise as realtors to help keep your property compliant and occupied.
Contact us today for a complimentary, non-obligatory rental property analysis!
