The holiday bustle is on its way, and with so many tasks on your plate like prepping for 1099s, we’d like to help you finish the year strong. Now is the time to address any accounting “housekeeping” and reconciliations so that the new year (and tax season) is a breeze.
Dive into all the important tasks on your year-end checklist with details for ensuring your accounting is on-track, tackling those verification tasks, and checking off those vital year-end tasks such as 1099 prep and forecasting for the year ahead.
This article is to help you systematically and efficiently check off those crucial items on your 2022 to-do list to step into 2023 more prepared and ready. Before we begin, we will reference reports, tools, and resources from the Rentec Direct property management software program. If you are using a different software program, this information and checklist is still useful but reach out to your provider to ask about their report titles and to see if they offer these tools and resources to accomplish these important tasks.
Housekeeping
Verify all transactions are categorized
You’re not going to get a full picture nor will your reports or 1099 tax forms be accurate if your transactions are not properly categorized. The best way to find those uncategorized transactions is to pull up a Uncategorized Category Ledger report for All Properties and All Bank Ledgers. Make sure to edit each transaction with the appropriate category (and double check the appropriate vendor is listed and all details are correct).
Complete any pending move-outs
Pull a Rentals Ending report to view any outstanding tenant move outs that haven’t been fully processed in the system.
You can also verify all tenant security deposits have been property documented for those move-outs by pulling a Tenant Deposit report. Remember to archive any tenant that has moved out.
Post last minute 2022 expenses or charges and pursue outstanding tenant and owner balances
Making sure all last minutes charges, expenses, payments, and disbursements are captured in your software before the end of the year insure they hit the book in the appropriate year for taxes and budgeting purposes.
The Delinquent Tenant report and Multi-Tenant Ledger report give a clear picture of tenant balances and credits. The Balance Sheet will show which property owners are in the red. Heading into the new year with a zero balance across the board is a good practice and giving tenants and owners notice in November gives them plenty of time to resolve their balance so you can record the data before the year’s close.
Wrap up office tasks
Lease Expiration: you may be leaving money on the table if you haven’t pursued lease renewals. Understand where tenants are in the lease cycle by pulling a Lease Expiration report.
Reminders are only helpful when you respond to them. Clearing out old reminders can help you start fresh in the new year.
Maintenance Requests: be sure they are getting buttoned up so you can post those 2022 maintenance expenses. Pulling a Closed Work Order report let’s you review what’s happened over the year and double check if expenses have been documented.
Reconcile
Reconciliation doesn’t have to be daunting but its understandable overwhelming if you’ve been putting it off. It’s important to have your books (ledgers) for your physical bank accounts and your property management software ledgers to match. Here are some handy tools to help you make sure your ledgers are accurate:
Transaction History Audit allows you to review transactions for edits and corrections and to help identify misuse whether inadvertent or deliberate. This tool can also help you find missing transactions and support you if you are ever audited.
Bank Sync isn’t a required step but a handy tool before conducting your reconciliations. It is a check-and-balance to ensure all the transactions on your physical bank ledger have been entered into your accounting software.
Bank Reconciliation is usually required by most states to be conducted monthly. This important step is often overlooked your weeks are busy. Because your Rentec Direct software supports this process by helping you catch errors and add adjustments, reconciling isn’t difficult. But the longer you wait to reconcile, the more difficult it becomes to find those errors. So, if you haven’t done so, now’s the time to conduct those reconciliations to match your bank statements. Don’t skip it – don’t be intimidated, it’s an easy process.
3-Way Reconciliation is an important process that auditors are keen on property managers completing. A lot of states require 3-way reconciliations to be sent in monthly. If your state board doesn’t provide these worksheets, feel free to save, print, and follow our sample worksheet: Three-Way Reconciliation Report for Property Management
Tip: The simple worksheet will walk you through the easy process — just go line by line to add the details. The ultimate goal in part four is the same for any reconciliation, a zero balance. If a balance isn’t zero, the above steps and tools in your software will help you find the missing transactions.
Verify
User permissions & 2-Factor Authentication are important to verify to ensure each user has a unique account, user name, and password to keep a clear paper-trail for transaction audits.
Vendors, Owners & Tenants information should be kept up-to-date. It’s a good practice to reach out to everyone annually to ask if any information has changed and get that updated in the system before the year’s close.
Verify Tax ID numbers follows the same reasoning. Vendors can change company names and locations or business status. Be sure to get updated W9 information and keep it on file.
Property & Renter’s Insurance is another quick item to verify before closing out the year.
Owner & Tenant Statements provide information by portal access right at their fingertips. It’s a great time to remind owners and tenants to check out those statements and financial reports for accuracy.
Final Tasks
End-of-year bookkeeping tasks are one of the biggest stressors for property managers, including getting prepared for sending out 1099s. Use these features and tools:
Your Rentec Direct property management software comes ready with a useful features like the 1099 Tax Assistant report. In your Settings go to Financial Reports and pull the 1099 tax assistant report by All Properties with the entire year date range.
Look for missing information such as the tax identification number (EIN or SSN) and address. These must be present to proceed with processing your 1099s through Nelco Solutions, our integrated partner. If that information is missing you can update it by going to your Settings and Editing your Vendors & Payees.
Note that you can filter the report to only show the vendors and payees (such as owners) that have been paid $600 or more in the year that mirrors the IRS requirement of who must receive 1099 tax forms.
Also note that under the Owner Payment section you will see both rent and distribution totals. Because some believe owners should receive a 1099 on the gross rents collected while others say it should be based on the owner distributions (rents minus the expenses), the report provides both values. Rents are gross rents and distribution is the amount of funds sent to the owner after the expenses. If you’re unsure which amount to report on the Owner’s 1099, talk to an accountant or verify your state rules for reporting that information.
For a comprehensive walk-through on processing 1099s with Rentec Direct and Nelco can be found here: 1099 Tax Forms | Federal and State E-Filing and Print Options
What Information Do I Need to File 1099s?
For each individual or entity that you intend to file a 1099 for, you will need their:
Tax ID Number (TIN)| For individuals, this is their social security number (SSN), for businesses, it’s their employer identification number (EIN).
Address | This allows you to send recipients a required copy for their tax reporting requirements.
Funds Paid | You will need to know the cumulative amount of money issued to the individual during the tax year. Obtain your owners’ and vendors’ tax ID number and address by requiring a returned W-9 form. A W-9 form is an official IRS document to request and certify a taxpayer’s identification number and address.
A training video is available to walk you through the process of submitting your 1099-MISC and 1099-NEC tax forms with Rentec Direct through the Nelco Dashboard here: 1099 Tax Form E-File | Rentec Direct Training
1099 Time-Saving Tips
It is always a good idea to require a vendor or owner to fill out a W-9 when you first engage in business with them so you do not have to scramble for this information come tax reporting time.
Asking for an updated W-9 yearly will ensure you always have their most current address and information and aren’t surprised by any changes in their business.
It’s not too late to send a W-9 to owners and vendors before 1099s are due. You can find more information about the IRS W-9 (instructions and a printable pdf form) here: About Form W-9
Because 1099s are due early next year and the end-of-year wrap up is weeks away for those that close their books December 31st, it’s the perfect time to ensure your property management software and all accounting ledgers and information are up-to-date.