Tax Reporting Tips For Vacation Rental Property Managers

Jesse Ehret
Founder & CEO on
December 7, 2023

Tax season may be unavoidable, but it doesn’t have to be an obstacle for vacation rental property managers. When it comes to filing your federal income taxes, make sure you check all the boxes by following these tax reporting tips from the team at Ximplifi, experts in accounting for vacation rental property managers:

What Not to Report to the IRS

Let’s start by clearing up a common point of confusion: you don’t need to report the rental income you collect on your client’s behalf or the expenses you pay to maintain their vacation rental properties. The IRS does not consider this part of your tax liability as a business that manages short-term or vacation-rental properties for their owners.

What to Report to the IRS

You are only liable for paying taxes on the income, fees, and commissions you collect from your clients, the property owners. However, that’s not all you need to report to the IRS.

In order to ensure that landlords are paying all the taxes they owe, the IRS requires property managers to issue 1099 forms to each property owner they serve. This document lists the net amount your property management company paid to the owner over the course of the year, which will determine the owner’s tax bill.

You also need to remit 1099 forms to any contractor or professional you hired to work on the property, provided you paid that person more than $600. For example, if you have a handyman you call on whenever something breaks, you need to report how much you paid him so that the IRS can properly assess his income and tax bill.

The only exception to the previous reporting requirement is if you hire a company rather than a contractor. If you hire a contractor to clean properties after guests, for instance, they need a 1099, but if you hire a cleaning company to do the same work, you don’t have any tax reporting requirements.

All 1099 forms need to reach the recipient (either the property owner or the contractor) by Jan 31 after the year being reported on. The IRS needs the same documents by Feb 28th. You have the option to file automatically, and any company that issues more than 250 1099s a year must use this option.

How to Handle Tax Reporting

There are only two ways to get the details of tax reporting right. One, rely on a fantastic financial management software, ideally one that accommodates the unique tax and accounting requirements of vacation rental property management companies.

Two, hire an outsourced accounting firm to handle the heavy lifting around tax time. Outsourcing ensures the work gets done correctly and on time, all while freeing you up to focus on other things instead of scrambling through tax documents just as your business is ramping up for the summer season. Have questions about ongoing accounting services? Contact the team at Ximplifi to learn more.

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