Important Reminders for Owners of Rental Properties
- 1099-NEC forms – 1099-NEC forms for tax year 2023 are required to be issued to individuals or companies (corporations excluded) to whom you have paid at least $600 for services. These forms are required to be provided to vendors and filed with the IRS no later than 1/31/24.
- Please ensure that all vendors who meet these criteria have completed and signed a Form W-9 (see link below) because this form has all of the information you need to prepare 1099-NEC forms.
- Fillable W-9 form: https://www.irs.gov/pub/irs-pdf/fw9.pdf
- Please contact our office if you would like us to prepare 1099-NEC forms for you; our service would include preparation & filing of the 1099-NEC forms for the recipient and the IRS.
- If you would like to prepare 1099s yourself, there are websites you can use to do so (e.g. https://www.track1099.com/).
- The IRS has opened a free option to file yourself: https://www.irs.gov/newsroom/irs-opens-free-portal-to-file-information-returns-new-electronic-option-can-reduce-millions-of-paper-forms-1099-estimated-to-be-filed-by-businesses-in-2023 Pre-registration is required, so sign up now.
- Payments by credit card, PayPal, and similar services are exempt since those processors issue 1099s. Cash, check and ACH payments may need to be reported.
- Note: One of the companies you should send a 1099-NEC to is Tandem CPAs.
- Practice Tip: Before paying any contractors for services, obtain a signed W-9 which will provide you with all information needed to prepare and file Forms 1099. In addition, it will help you determine whether a filing is even required (e.g. if the business is marked as an S corporation or C corporation, no 1099 filing is required). If payments are made to large, publicly traded corporations, you do not need to request a W-9.
- Important NEW Beneficial Ownership Information (BOI) Reporting
- The Corporate Transparency Act was enacted in early 2021. The purpose of the Act was to reduce money laundering, the funding of terrorism and other illicit activity.
- Most LLCs are required to file. If your rental is in an LLC (or a partnership registered with a state), you likely need to file. If you do not have a registered LLC or other entity, this likely does not apply to you.
- The information is to be self-reported by owners.
- Noncompliant businesses may be subject to civil and criminal penalties. Fines start at $500 per day.
- Deadlines for initial reporting are as follows:
- Entities formed in US prior to 1/1/24 have until 1/1/25 to file the first report.
- Entities formed in US after 1/1/24 have 30 days from formation to file first report.
- Register at https://www.fincen.gov/boi starting in January of 2024.
- This report is not part of your tax return and we cannot file it for you.
- Please see booklet linked below to determine if you need to file and for details. Consult an attorney if you are unsure of your filing requirements. (CPAs may interpret tax laws for you, but this requirement is not considered a tax law.)
- More information here: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf.
- State use tax– Use tax is the complement to sales tax; if your business has purchases on which sales tax wasn’t collected, then CO requires your business to pay use tax on those purchases. Colorado requires use tax to be paid on any items for which sales tax was not paid (e.g. merchandise purchased on the internet or through catalogs). Sales tax is generally due for short-term rentals (i.e. less than 30 days). Generally, the due date for annual use tax returns is January 20th of the following year. However, if your business has accumulated use tax of $300 or more (approximately $10,000 of purchases for which sales tax was not paid) during the year, the due date is the 20th of the month following this accumulation. A link to the state use tax return is below for your convenience, but if you would like our firm to prepare use tax returns for your business, we would be happy to assist you prior to February 2024.
- Fillable state use tax return: https://tax.colorado.gov/sites/tax/files/documents/DR0252_2022_V2.pdf
or go to
and choose “File a Consumer Use Tax Return” under “Sales and Use Tax” header.
- County or city use tax – The state of Colorado collects sales & use tax for some cities and all counties except Broomfield and Denver counties. However, some cities and counties are home-rule, which means that they collect their own sales & use tax (Louisville and Boulder are home-rule cities; for a complete list, see pages 13-16 on the DR 1002 available here: https://tax.colorado.gov/DR1002
- These home-rule cities and counties often also have a use tax filing requirement, so if your business resides in a home-rule city or Broomfield or Denver county, please contact the city or county to determine if there is a use tax filing requirement.
- Business mileage –If you are not tracking miles throughout the year, we strongly recommend starting a mileage log. There are apps available for mobile devices that can automate this task for you. In addition to the mileage log, it is best practice to record the mileage as of 12/31 every year per the odometer for personal vehicles used for your rental activity in order to substantiate business miles. The IRS may not accept your vehicle expense deduction without a mileage log.
- Personal vehicles used for business – If you haven’t already done so, complete a mileage log to substantiate the miles you incurred on personal vehicles used in connection with your rental in 2023. The mileage log should substantiate the date, starting location, destination location, miles, and business purpose of each trip. If you don’t have a mileage log, this is a good time to go back through your calendar to look at business appointments in order to reconstruct your business miles for the year.