From everything below this paragraph, it shows I'm suppose to send GROSS rents on the 1099. My concern is a 3rd party distributes a 1099-K for the electronic payments fo the NET rent that I send. Do I still need to report Gross Rents or do I report the difference between the Gross Rents and the 1099-K amount? If I do the former, reporting Gross Rents, then the owner would have incorrectly have 1099s for double the income. My accountant said do do Gross and then have owner right as an expense the 1099-K as a double income reporting.
I see on 1099-MISC Instructions that: "...However, the real estate agent or property manager must use Form 1099-MISC to report the rent paid over to the property owner. See Regulations sections 1.6041-3(d), 1.6041-1(e)(5), Example 5, and the instructions for box 1."
So in that paragraph it does say I need to "rent paid over to the property owner." I would assume that means NET rent (after property management fees and other expenses are deducted from rent). HOWEVER, read all the info I'm gathering:
1. This article says Gross (old from 2012 though): https://bradfordtaxinstitute.com/Content/Property-Manager-Reports-Rental-Income1099-MISC.aspx
2. Buildium I read used to give you the option, now requires Gross (click "Box 1 - Rent" to expand details): https://support.buildium.com/hc/en-us/articles/[removed]-How-does-Buildium-calculate-1099-totals-
3. This Inman article also says to bill 1099-MISC as NET RENT however, read the comments where these discrepancies I'm concerned with: https://www.inman.com/2012/02/10/tax-reporting-tips-property-managers/
From comments section:
Justin Gall - I own a property management company that manages approximately 400 unit with 105 clients. We get this question every year by several clients (including CPA's) and it seems as though it was a gray area. After speaking to the IRS, they also referred me to 1.6041-1(f). To help make the decision final, our software company and the other big 3 (Propertyware, Buildium, Rent Manager, & Appfolio) all use the gross rents collected (not net) when producing the 1099's. So that's that--we don't even have the option to decide.
Details from 1.0641: https://www.law.cornell.edu/cfr/text/26/1.6041-1#a_1_i_B
Also explained on: https://rentables.com/services/property-management-software/posts/do-property-managers-need-to-send-...
"Example 5.
G is a rental agent who manages certain rental property on behalf of property owner H. G finds tenants, arranges leases, collects rent, responds to tenant inquiries regarding maintenance, and hires and makes payments to repairmen. G subtracts her commission and any maintenance payments from rental payments and remits the remainder to H. With respect to payments to repairmen, G is performing management or oversight functions and is subject to the information reporting requirements of section 6041. With respect to the payment of rent to H, G is subject to the information reporting requirements of section 6041 regardless of whether she performs management or oversight functions or has a significant economic interest in the payment. See
§ 1.6041-3(d) for rules relating to rental agents. See
§ 1.6041-1(f) to determine the amount that G should report to H as rent."
26 CFR § 1.6041-1 - Return of information as to payments of $600 or more.
(f) Amount to be reported when fees, expenses or commissions are deducted -
(1) In general. The amount to be reported as paid to a payee is the amount includible in the gross income of the payee (which in many cases will be the gross amount of the payment or payments before fees, commissions, expenses, or other amounts owed by the payee to another person have been deducted), whether the payment is made jointly or separately to the payee and another person. The Commissioner may, by guidance published in the Internal Revenue Bulletin, illustrate the circumstances under which the gross amount or less than the gross amount may be reported.
