Airbnb 1099 Forms: Everything you Need to Know
If you’re an Airbnb host and receive any kind of taxable income from your rental activity, you’ll likely need to file IRS Form 1099-MISC. In this article, we’ll take a closer look at what a 1099 form is and what it covers. We’ll also provide tips on how to fill out the form correctly and avoid any penalties. So whether you’re a frequent Airbnb user or just getting started, make sure you know about 1099 forms!
Airbnb is a known name that is known the world over. What started as a basic ‘rent-out’ service in the year 2008, has grown to become a popular brand name that is trusted for its reliability. Also known as ‘Air Bed and breakfast’ the service started in America in the year 2008. As of now, Airbnb does not require any introduction and stands at a remarkable net worth of $88.01B for the year 2023. The service is an online portal that has been designed to allow people who wish to rent out their spaces and homes to those who are looking out for the same during their travels and holidays. While it might sound simple, yet there are certain aspects of the procedure that one needs to know of. The Airbnb forms are one to start with.
To start with the Airbnb 1099 forms are where the interaction between the two partners reaches a professional ‘stage’. While most might find the forms rather ‘scary’ to start with, nevertheless, this can be quite simple. So here’s about the Airbnb 1099 Forms: Everything You Need to Know
The 1099 Forms: When you Receive them
Once the individual passes somewhere around 200 transactions or makes about $ 20000 in gross revenues, Airbnb issues the 1099-K forms. In case you are unable to make as much, then you won’t be entitled to the forms. On receiving the forms, you will need to report the exact amount as shown in box 1a (as shown in the image above) as ‘gross recipients’. Next, you will need to report any fees or commission as a Deduction, separately. There are chances that the IRS might go for a review, in case the income as recorded in the forms is different from those in the tax forms.
You also need to be aware of the fact that the gross recipients are not equal to the payouts. Here you need to know that the payouts do not comprise the fees and commissions, hence it is recommended to check out your transaction history closely. It is also a smart move to report gross earnings, even in the case of smaller amounts.
Read More-: Self-Employed Taxes for Dummies
The 1099 Forms: When you issue them
As and when you end up paying an amount of $600 in services or rent to the contractors, it is recommended that you issue 1099-MISC forms. Also, keep in mind that you do not need to issue the form for personal purposes, but only for business purposes. The other ways to issue the 1099 forms is through other individuals, partnerships and other Limited Liability Companies or LLCs. One does not need to issue the 1099 forms to corporations.
In the case of Home Sharers, the commonly used 1099 forms will include:
- Home Improvements: These are projects that cost $600 and require the 1099 MISC forms. The exception is if the contractor is a corporation. Also, you need to include the supply cost if you have billed them on Form 1099-MISC.
- The Cleaners: These are the proprietors who generally operate under a false business name.
- Landscaping: This is for jobs that cost more than $600, hence one needs to issue a 1099-MISC form in this case
One must bear in mind that the above apply on when you are under contract work. However, in case you purchase a few supplies then the invoice is sufficient to serve as a document to claim the deductions. One of the most recommended methods to limit 1099 issues is to utilise corporate services for routine tasks. This does not include TunoverBnB cleaning services, hence there is less of a tax complication for the hosts. Some contractors recommend direct billing and cost-by-project reports.
When you Choose not to File
Most experts strongly recommend the 1099 forms. Failing to do so can cost you penalties anywhere between $30 to $100 for a month! However, if the IRS suspects and verifies that failing to file from your side has been done intentionally, then you will have to face a minimum penalty of $250 for every statement. So, be careful.
Also, there are cases, where the IRS will disallow the deduction for the contract work where the form 1099 is required but has not been issued. Hence you need to start paying the taxes for the contract fee because of the lack of proper documentation. It is a smart move to use something as basic as Excel or Google sheet to add up totals per contractor, as this will help you keep track of all your payments for future reference.
Steps to File 1099 with the IRS
To start with, you will need to issue a Form W9 to the relevant contractors and use the details to fill out the 1099 forms. It is advised to issue the 1099 forms before the start of your work by the contractors. This is because it is tough to get a W9 filled out once the year is over.
But the sad part is that one cannot print out the 1099 forms online and send them over to the IRS. But, you need to keep in mind that one can only mail the official 1099-MISC forms to the IRS. This is because every form includes a unique document locator number, and sending the wrong 1099 form can also lead to a $50 penalty!
Next, you need to indicate the non-employee compensation in box 7. This also includes the case where you reimburse the contractors for supplies, which too will go over to box 7. The total comprises all the payments, inclusive of materials and parts.
Likewise, you can do some research work yourself about the IRS instructions on how to mail returns.
How does One File the AirBnB 1099 Taxes
There are times when the AirBnB 1099 taxes might be a hassle, but when the money pours in due to the business, you need to get the needful done. This is essential, as there are people who make their livelihood out of renting their place and use a platform like Airbnb for this purpose. The various aspects of the same comprise the check-in management, the issues of the guests, and CDC approval cleaning; hence there are times when the tax calculation takes a back seat. However, here are a few vital steps to allow you to deal with your 1099 taxes smoothly.
Need Experts Help-: How to Print 1099 and 1096 Forms in Sage 100
Airbnb Independent Contractor Taxes: The Reporting
In the case of the classified independent contractor, it is required for you to report your own federal and state income taxes. According to the IRS, AirBnB hosts fall under the non-employees, hence they will need to file FICA self-employment taxes both as an employee and as a business. FICA taxes include both Social Security taxes and Medicare taxes.
This differs from being an employee of a company as they have the power to withhold the employer’s portion of FICA taxes for you. Every portion comprises 7.65%, which amounts to 15.3% of the gross AirBnB income currently. The best part is that half of the FICA tax owned by you could easily be written off to lower your taxes.
Other than the Income tax you can also owe sales tax according to the state of your property and reservations. Hence, it is advised for you to ensure before you file the tax returns you need to make sure the taxes are not withheld by Airbnb itself.
Your Earnings and Airbnb
There are times when the individual wonders if AirBnB keeps track of her earnings. Well, this greatly depends upon the kind of information and details you have shared with them. There is a fat chance that the company might already be withholding the income taxes from you. However, if in case you have not provided them with the W-9 information then they need to withhold about 24-28% from your payouts and submit the same to the IRS. You can find out if they are withholding the taxes from you by contacting them directly.
The Difference Between AirBnB 1099-NEC Vs 1099-K Forms
For the independent contractor for AirBnb, you are required to file a 1099 tax form for your gross earnings to the IRS. These forms are different depending upon your state but apply to both services like photographers, translators or the host and the rental host alike. ‘
In case the AirBnB rental business earns more than $20000 in sales and also has over 200 reservations during the calendar year, then the AirBnB must send the form 1099-K form to you.
In case one has earned more than $600 or more from the services provided by AirBnB’s service provider’s section, then you will have to report the income on a Form 1099-NEC. This was earlier known as 1099-MISC. This is common for the individuals who utilise the ‘Experience’ section on AirBnB like tour guides, photographers, translators, or local experts.
In case you belong to Vermont or Massachusetts, then it is required for you to file a 1099-K. This also applies to the case if and when you make more than $600 in a year, instead of the 1099-NEC on the tax return.
Generally, these forms can be issued late in January by traditional mail or email. Also bear in mind that the Income and Sales tax is in majority but does not include all of what you might owe the internal revenue services.
Also Read-: How to Pay 1099 Vendors
Airbnb is a full-time source of income for most people. This is the reason why it is important to be able to get your taxes in the right order. While it might appear to be complex in most cases, however, with the right knowledge and a little bit of help you are sure to be well-sorted. However, in case you still encounter any issues with the same, feel free to reach out 1800 964 3096 to our team of experts and they will assist you accordingly.
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💠Frequently Asked Questions💠
When are the AirBnB 1099 Taxes due?
The IRS expects any business owners making more than $600 per year in rental income to make quarterly estimated tax payments These are due on the following dates:
🔹 Quarter 1- April 15 th
🔹 Quarter 2- July 15 th
🔹 Quarter 3 – September 15 th
🔹 Quarter 4 – January 15 th
The business owners need to bear in mind that they can be charged with interest on top of the taxes owed by you already in case of underpaying the right amount. Likewise in case of overpaying you are giving the IRS an interest-free loan rather than investing in the business. Hence, it is required to make an accurate estimation of the payments to save money.
What is the 14-Day Rule?
There are times when people do not wish to rent their homes and spaces because they do not want to share their rental income wrongly with the Internal Revenue Service. However, this can be easily sorted out with the help of the 14-day rule. This is related to the fact that you do not need to report your income if:
🔹 If you Rent your property for 14 days for a year or less
🔹 Ensure that you use your space by yourself for 10% or 14 days of the total days that it is rented over to the others.
While the above holds in most cases, still there is a slight catch you need to be aware of. In case you do not report your income you cannot write off any associated expenses. However, you can still use the mortgage interest and property tax deductions to lower the tax payments.
What are the most common AirBnB Tax Deductions and Write-offs?
Writing off expenses and keeping track of the same can help business owners retain most of their hard earned cash to themselves.These include:
🔹 The cleaning supplies and services
🔹 Property depreciation
🔹 Property insurance and private mortgage Insurance PMI.
🔹 Service fees by Airbnb
🔹 Mortgage loan Interest.
🔹 Bed and Breakfast supplies like coffee, food, and disposable bathroom supplies.
🔹 Property utilities like gas, water, electricity, cable TV and Wi-Fi
🔹 Advertising cost.
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