Mandatory Tax Forms for Reporting Leasing Activity

As a property manager, to fully account for and report your annual leasing profit to the IRS, you will need various Internal Revenue Service tax forms which you’ll find explained within this short article. As is discussed here, the tax forms considered necessary vary depending on the type of authorized company that is the owner of the rental (individual, partnership, corporation, or LLC). Look at the page called Best Rental Property Ownership, found in this Guide, for more relating to legal entity rental property ownership.

NOTE: You’ll find the documents outlined in the next paragraphs on the Internal Revenue Service’s webpage: http://www.irs.gov/Forms-&-Pubs. All of the required forms will likely be available in any tax preparation computer software, if you are using one.

Individual Ownership

Which includes shared rental property ownership with a spouse, tenancy in common, or joint tenancy with rights of survivorship.

Form 1040. Foremost, you’ll require Form 1040, the document used by all individual people. Your own net rental property earnings or deficit subjected to taxation will be found on line 17 of the first page of Form 1040. Please note that as a law abiding landlord with leasing income and expenses, you are not allowed to utilize the simplified Forms 1040A or 1040-EZ.

Schedule E. Schedule E is an addendum of Form 1040. Of its numerous usages, just the purpose of reporting rental property profits and expenditures is applicable to your needs. The one element of Schedule E you have to fill out is the section marked “Part I”. There are many relevant notes you should be aware of, for example: if reporting on a rental you jointly own with a partner, who isn’t your spouse, you only have to report the expenditures that you incurred plus the revenue that you earned. Try to remember, additionally, that you’ll have to allocate expenses between rental and non-rental usage if you are leasing a segment of your own private residence, or whenever you leased only for part of the year. For additional information, find Tax Deductible Rental Property Expenses, the article series that is with this Guide.

Form 4562. Form 4562 must be used to quantify depreciation of your property, which you’ll deduct on line 18 of Schedule E. For more advice, find the article titled, Depreciation Expenses for Rental Property, that is available in this Guide.

Partnership/Corporate Ownership

A general or limited partnership, or S corporation is included.

Form 1065/1120-S. For people with a collaboration, you need to fill out Form 1065, the tax form a collaboration utilizes to report everyone of its company activities. Form 1120-S is employed by an S corporation to report business activities. Schedule K, line 2 of Form 1065 or 1120-S is where your own total leasing financial loss or earnings are going to be reported (Such forms are incorporated with Schedule K).

Form 8825. Form 8825 is designed for partnerships and S corporations, yet functions similar to Schedule E. Schedule E and Form 8852 are in essence very similar. Always include complete sums of all earnings and expenditures accrued by the partnership or corporation (In the future, these are going to be divided among each investor or business partner).

Schedule K-1. The total rental property earnings or losses due to each investor or business partner is reported by this form, in accordance with the ownership interest of each investor or business partner. The information of the K-1 sent to every partner will have to be reported on their own Form 1040, Schedule E, Part II.

Limited Liability Company Ownership

You’ll be able to file just like you are an individual owner because, for tax purposes, a single-member LLC is a disregarded entity (look above). A multiple-member LLC may choose to be taxed as either a partnership or as an S corporation (look above).

Redmond CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.