Necessary Tax Documents Concerning Reporting Rental Activity

For a landlord, to properly account for and report your annual rental funds to the Revenue Service, you need multiple IRS tax forms which will be explained inside this brief article. Depending upon the kind of authorized entity that manages the rental property, the tax documents that are required are different, as is outlined just below (individual, partnership, corporation, or LLC). Look at the article entitled Best Rental Property Ownership, found within this Guide, for more information regarding legal entity rental property ownership.

Quick Note: You will find the documents described just below on the Revenue Service’s webpage: http://www.irs.gov/Forms-&-Pubs. If you are using tax prep programs, it has all of the necessary documents.

Individual Ownership

This includes shared ownership with a husband or wife, tenancy in common, or mutual tenancy with right of survivorship.

Form 1040. First and foremost, you have Form 1040, the tax form filled out by all individual taxpayers. Found on line 17 of the first page of Form 1040 is the total rental profits or financial loss, subject to taxes. Remember that as a good property owner with leasing income and expenses, you will not be able to use the simple Forms 1040A or 1040-EZ.

Schedule E. One addendum to Form 1040 you have to learn about is Schedule E. It has a number of usages, and the purpose applicable to yourself is reporting of rental property income and expenditures. The element of Schedule E labeled “Part I” is the one part you have to complete. There are many critical tips that you need to remember, including: if you ever own the rental mutually with someone else who isn’t your wife or husband, report only revenue you collected along with the expenditures which you suffered. Remember, , that you will need to distribute expenditures between rental and non-rental usage if you are renting a segment of your own personal property, or when you only rented for a part of the calendar year. View the compilation of articles entitled Tax Deductible Rental Property Expenses, available with this Guide, for more details.

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

Partnership/Corporate Ownership

A general or limited partnership, or S corporation is an example.

Form 1065/1120-S. The document a joint venture employs to report every one of its company activities is Form 1065, that you will have to use if you have a collaboration. Form 1120-S is used by an S corporation to report enterprise activities. Your own net rental profits or financial loss are reported on Schedule K, line 2 of Form 1065 or 1120-S (Schedule K is embedded inside those documents).

Form 8825. This document acts similar to Schedule E, but for partnerships and S corporations. It is basically very similar to Schedule E. Make sure to report total amounts of any revenue and costs accrued by the partnership or corporation (Later, they are divided among each investor or partner).

Schedule K-1. The net rental earnings or loss owing to each investor or partner is reported by this document, in line with the property ownership interest of that investor or business partner. The contents of the K-1 sent to each and every business partner needs to be reported on his or her Form 1040, Schedule E, Part II.

Limited Liability Company Ownership

You could file as if you were an individual rental property owner considering that, for taxation uses, a single-member LLC is a disregarded entity (see above). A multiple-member LLC might choose to be taxed either as a partnership or as an S corporation (look above).

Renton 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.