Tis’ The Season for 1099s
It’s nearly tax season, but that doesn’t have to equal stressful, sleepless nights of preparation. AppFolio simplifies the 1099 process, making it possible to submit your documents to the IRS in an accurate and timely fashion. Learn more on tax preparation in today’s blog!
It’s already November, which means it is time to start thinking about your 2019 taxes. If you’ve been keeping up with your accounting in AppFolio, then the process should be relatively quick. If not, there is still time to get everything corrected! The following is a checklist of items that should be completed before generating any tax reports:
- Your bank reconciliations should be completed through 12/31/2019
- All of your deposits should be cleared (no deposits from prior months) and all of your checks should be current and valid (payees can cash checks 6-12 months after the issue date depending on the state)
- Check your Diagnostics under Accounting > Diagnostics – there shouldn’t be any outstanding items in any of the categories (except Positive Additional Fees if you haven’t collected this month’s management fees)
- Make sure that your Prepaid Rent GL account is included on your Cash Flow report (to include this GL account to go Accounting > GL Accounts > Select the Prepaid GL account > Edit > Check “Include on Cash Flow” > Save)
- Be sure that all of your vendor bills that should be paid in 2019 have been paid and sent to the related payee
- Make sure the Taxpayer is correct on each property by running a Property Directory and adding a “Vendor 1099 Payer” column
- Run a Vendor Directory to check that the vendors who should be receiving a 1099 are set to “Yes” and verify their mailing address (should be U.S. based)
- Run an Owner Directory to check that the address is valid and U.S. based, if the zip is outside of the U.S., the 1099 form will be rejected by the IRS and you will need to re-file with a valid mailing address
- Have your owners sign into their portal and accept electronic 1099 filing if that is your preference or is required* (to active the portal, enter their email under the Contact information on their owner page)
After you’ve completed these items, you are ready to review your 1099s for your owners and vendors before sending them to the IRS (Dun, dun, duuunnn! Just kidding, it’s not that scary).
To review your owner 1099s, run an Owner 1099 Detail report, and compare the “Income” line item to the related Cash Flow report for that owner and from 01/01/2019 – 12/31/2019. AppFolio does respect ownership changes on the Cash Flow when it’s run by owner, and as of recently, it respects ownership percentages. If you run the Cash Flow by property, be sure to adjust the dates to match the period of ownership in 2019. Now let’s verify your numbers are right!
The Cash Flow report should match the amount showing under “Income” on the Owner 1099 Detail report when you take the Total Operating Income + Prepaid Rent (subtract prepaid if it shows as a negative). If these number don’t match, be sure you are exempting additional fee’s from 1099 reporting (a setting under Accounting > GL Accounts under the specific GL account) and the Total Operating Income. Generally, the calculated number from the Cash Flow and the figure on the 1099 Detail should match after you consider everything above. If they don’t tie out, APM Help can assist and ensure that everything matches before submitting the final documents.
When you are ready to run your vendor 1099s, pull the Vendor 1099 Detail (or summary if you would like less information). You can confirm these numbers but running a Vendor Ledger or Bill Detail for that vendor for the fiscal year. All vendor payments should be in AppFolio as a bill/payment, not a Journal Entry (JE). If you do have any payables entered as JE’s, it would be best to re-enter them under the correct vendor and property and then reverse the JE.
Once you have confirmed that all of the payables are accurate in your system for your vendors, you can go ahead and submit your 1099s. If you have a vendor that performed service on properties with different tax payer setups, then the system will generate multiple 1099s. This is correct, so be sure to submit all of the forms generated!
Time to Generate Your 1099s!
You’ve verified that all of the calculated 1099 figures are correct, now it’s time to submit your forms! To generate 1099s in AppFolio, search “1099s” in the Universal search bar (at the top of your database). By default, it is set to send to owners or vendors that received $600 in income or payments in the fiscal year. You can adjust this, but the $600 minimum is based on the IRS requirements. Make sure your tax year is set to 2019 and “Search”. You now have the option to preview your 1099s, send them to vendors/owners directly via mail (this will print in 1099-MISC copy B format), and either print (copy A) or e-file with the IRS.
If you have more than 250 forms to file, then you will need submit your 1099s via e-file/FIRE file. If you have less than 250, you can still submit the forms electronically, or you can submit paper forms. To learn more about IRS requirements and exemptions, please visit their website.
If you’ve chosen to submit your forms via e-file you will need to apply for a Transmitter Control Code (TCC) which can take up to six weeks to process. You can apply for your TCC on the IRS website (https://fire.test.irs.gov/). If you have one from last year, then you don’t need to apply for another one unless your tax ID has changed.
Once you have your TCC, go back to the 1099s task in AppFolio and generate your FIRE file. You can upload your FIRE file to the IRS here.
If you are printing your 1099s, AppFolio generates a 1099-MISC copy A form, which can be purchased on Amazon or ordered from the IRS for free. Keep in mind that it can take 2-4 weeks to receive your forms if you order from the IRS, so plan accordingly.
If you are printing the forms, be sure to print out the form on a blank piece of paper first to check the alignment before using the official forms. If you need to adjust your printer settings, select “Adjust 1099 Printer Settings” on the right hand side under “Tasks” in AppFolio. Once the forms are printed and ready to go, please see page 7 in this document for your states mailing address.
Tax preparation and filing can be overwhelming…we get it! APM Help is here to answer any questions you have on 1099 filing for your owners and vendors. You can reach us on our website or by calling or texting 281-949-8755.