A significant law change going into effect in 2024 involves rental income that Michigan landlords must report on their1099-K forms. The current tax season is the first in which the Internal Revenue Service has changed reporting requirements to address unreported rent.
IRS lowers reporting threshold
The reporting change affects landlords who receive rental payments via electronic means like rental collection apps and online payment platforms. The previous threshold for payment platforms and apps to issue a 1099-K was $20,000 in rental income. The threshold is now $600. You should expect to receive one of these forms electronically, via a hard copy in the mail or even in both formats.
Nevertheless, even if you didn’t receive a 1099-K from an electronic payment provider, you still need to report all rental income over $600 on your income tax form. Payment platforms like Venmo, PayPal and Zelle all provide these forms, but other companies may not. Before filing, make sure that your 1099-K forms are correct. Most providers won’t issue corrections, so it’s up to you to provide clarification to the IRS. Filing the proper forms and reporting rental income is essential because if you don’t, you could face fines from the IRS.
Accurately track your rental income
Landlords and property managers must juggle many different reporting requirements. Consider using accounting software to keep track of your rental income and other essential tasks throughout the year. In addition to 1099-K forms, you may also have to provide 1099-NEC forms to record payments to non-employees for services from independent contractors if you paid them more than $600 during the previous year. You may also need to file a 1099-MISC form for miscellaneous sources of income if you collect rent in the form of paper checks or cash.
Rental income not only comes in the form of monthly payments from tenants. Keeping a portion of a tenant’s security deposit at the end of a lease due to damage or repairs is also reportable income. Advance rent, tenant-paid owner expenses, and lease cancellation payments are as well.