Property Management – Calabasas – 1099’s

Do I need to issue 1099-MISC to my investment rental property manager?

I have a property management company that manages an investment condo rental I own. Let’s say they collect $10,000 total in rent for the year. Let’s say they keep $1,000 total for the year for fees/commissions, and disburse the rest ($9,000) to me. At the end of the year, they issue me a 1099-MISC form showing an income (to me) of $9,000.That all seems straightforward. But, do I need to issue them a 1099-MISC showing income (to them) of $1,000 (since it is over $600).

In TurboTax, it asks if I need to issue a 1099-MISC to anyone and it lists a common example as “Property Management”. So, I have paid $1,000 aggregate to a property management company in 2014. Do I issue them a 1099-MISC? I see lots of other answers on TurboTax saying that investment property owners don’t need to issue 1099-MISC forms at all. So, why is TurboTax asking me if I need to if everyone seems so clear that the answer is no.

Recommended answer

The key is that TurboTax does not already know if you must send a 1099-MISC. The answers to questions surrounding whether you must issue a 1099-MISC are not absolutely clear. This is a hot debate among the experts. So, what I say can be contested.

My take is that unless you are in the business of renting properties, the payments you make to your rental property manager are not “in the course of your business or trade.” That implies you do not need to give a 1099-MISC to your property manager any more than you need to give one to the neighborhood kid who mows your home’s lawn. However, the property manager will send a 1099-MISC to you (and you will need to report that as income), since that is a payment to you made in the course of the property manager’s “trade or business.” Additionally, if the property manager is a corporation, then you are exempted from having to issue a 1099-MISC to them.

I also presume the property manager “passes through” to you any expenditures for your property(ies) that you pay in order for you to include them as rental property expenses.

There’s an interesting discussion of the difference between rental activity as a business versus an investmnent at nolo at:
http://www.nolo.com/legal-encyclopedia/is-your-rental-activity-business-investment.html

From: ttlc.intuit.com

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