Filing taxes brings you back to your school days. It's like taking a timed test, but a wrong answer has much more serious consequences than a failing grade.
The pressure's ramped up for landlords. The anxiety over protecting their investment often leads to errors.
Read on to learn the four biggest mistakes landlords make when handling tax statements and 1099s and how to avoid them.
1. Missing or Incorrect Information
A major part of managing 1099 forms is knowing which one to use. It depends on what types of workers and income you're reporting. Check to see if you have the right one before you begin.
One of the most frequent errors when filing tax documents is providing incorrect information. You may omit or give the wrong:
- Names
- Social Security or taxpayer-identification numbers
- Addresses
Check that you've got it right before you file. Have a worker come in and compare the information you've put down against their identification cards.
Use the formats the IRS tax forms require. Put everything in the right boxes. If they ask for decimals to show dollars and cents, don't accidentally use dollar signs.
2. Reporting Incorrect Amounts
If there's one type of information you must get right at tax time, it's your income and expenses.
Report all sources of income. This includes:
- Rental income
- Security deposits
- Lease cancellation payments
Get exact numbers and don't round up or down. The best way to do this is by organizing financial records throughout the year.
3. Missing or Claiming the Wrong Deductions
Certain expenses can be written off as a deduction, including:
- Taxes
- Maintenance and repairs
- Property improvements
- Depreciation
- Property management fees
Missing any of these deductions leaves money on the table. Attempting to apply for one you aren't eligible for could result in penalties or an IRS audit. Look at the requirements and current tax laws carefully to check your eligibility.
4. Filing Tax Statements and 1099s Too Early or Too Late
You must file tax statements and 1099s by January 31. Any later could result in penalties.
Many filers don't know you can also file too early. Many IRS tax forms won't arrive until at least February 15. If you try to file before you've received them, you won't have everything you need.
Mark the due date on your calendar so you don't forget. Create a tax preparation checklist so you know what steps you'll need to take.
The best way to avoid tax filing mistakes is to hire a property management company to take over the process.
Avoid Landlord Mistakes With Property Management
Landlords dread when the time comes to file tax statements and 1099s. It's like a twisted test, but you can prepare for it and avoid mistakes. Keep careful records so you'll report the right information, especially in terms of income and expenses. Apply for all the deductions you are eligible for. Be sure to file at the right time.
PMI River City is the premier full-service property management company in Northeast Florida. Our team works to keep your property protected and profitable. Contact us today to see how we can help you exceed your expectations for your investment.
