As the year comes to an end, property management companies need to prepare for tax season, specifically for filing 1099s. These forms report payments made to vendors, contractors, and service providers throughout the year. If you're using AppFolio as your property management system, you can simplify and optimize the entire process. In this guide, we’ll walk you through how to prepare 1099s in AppFolio, ensuring accurate, timely filings.

Understanding the 1099-NEC and 1099-MISC

Before jumping into the AppFolio process, it’s essential to understand the two primary 1099 forms:

1099-NEC: This form is used to report payments made to non-employees, such as contractors, for services provided. Payments over $600 must be reported.

1099-MISC: This form is used to report miscellaneous income, including rents, royalties, and prizes.

For property management companies, the 1099-NEC is particularly important, as it applies to payments made to contractors like plumbers, electricians, and landscapers.

Now, let's look at how to get ready to file these forms using AppFolio.

Step 1: Review Vendor Information

The first step in preparing your 1099s in AppFolio is ensuring you have complete and accurate vendor information. To do this, start by generating the Vendor 1099 Summary report. This report allows you to quickly check if any vendors are missing critical information, like their Taxpayer Identification Numbers (TINs).

Here’s how to access the report:

1. In AppFolio, navigate to the “Reports” tab.

2. Search for "Vendor 1099 Summary" in the search bar.

3. Review the report to see which vendors are set to receive a 1099 and verify that all necessary information, such as their TIN, is present.

If you find any vendors without a Tax ID, you'll need to reach out to them to collect their W-9 forms, which contain the required details.

Pro Tip: Collect W-9s Before Paying Vendors

It's a good practice to collect W-9 forms before paying any vendor for their services. This prevents the last-minute scramble of trying to get the necessary information for 1099 filings. If you notice that certain vendors are not marked for receiving a 1099, review their information in AppFolio to make sure none are being missed.

In the Vendor 1099 Summary report, you can uncheck the box that filters “Only vendors that have requested 1099s.” This will show all vendors, helping you identify any who may have been overlooked.

Step 2: Ensure All Transactions Are Up to Date

Before starting your 1099 preparation, it’s crucial to ensure that all vendor payments have been recorded in AppFolio. This ensures that the totals reported on the 1099s are accurate.

Here’s what to check:

Transaction Records: Make sure all vendor payments through December 31st are correctly entered. Any missed payments could lead to incorrect 1099 totals.

Reconciliation: Complete all bank reconciliations to ensure your accounts reflect accurate payment information.

Chart of Accounts: Review your Chart of Accounts to ensure that appropriate accounts are marked as either exempt or not exempt from 1099 reporting. AppFolio allows you to flag accounts that shouldn't be included on a 1099, such as reimbursed expenses.

To generate the Chart of Accounts report:

1. Navigate to the “Reports” tab in AppFolio.

2. Search for "Chart of Accounts" in the search bar.

3. Review the list of accounts, and confirm that accounts related to payments requiring 1099s (such as repairs, services, etc.) are not marked as exempt.

Step 3: Run the Vendor 1099 Detail Report

Once your books are up to date and reconciled, you’ll need to review the Vendor 1099 Detail report. This report gives you a breakdown of each vendor's transactions that will be included in their 1099 total.

To access the report:

1. Search for "Vendor 1099 Detail" in AppFolio’s Reports tab.

2. Select a vendor from the list to see all the transactions that have been included in their 1099 calculation.

This step ensures that you are reporting the correct amounts for each vendor, helping you avoid discrepancies and IRS penalties.

Step 4: Double-Check for Missing Vendors

Even with complete reporting, it’s easy to overlook a vendor who should receive a 1099 but isn’t marked for one in AppFolio. To avoid this, return to the Vendor 1099 Summary report, and make sure that all necessary vendors have been flagged for 1099 reporting.

One common mistake is ignoring vendors who don’t provide services often, such as one-time contractors. To catch these vendors:

Uncheck the “Only vendors that have requested 1099” option in the Vendor 1099 Summary report. This will show you all vendors, not just those already marked for 1099s.

Review the list and mark any additional vendors as eligible for 1099s, based on your records.

Step 5: Prepare and Submit Your 1099s

Once all vendor information and payment records are verified, you’re ready to generate and file your 1099s through AppFolio. The system allows you to prepare the forms directly from the software.

How to Generate 1099s in AppFolio:

1. Use the universal search bar in AppFolio and search for "1099."

2. Select the appropriate year for the 1099 forms you’re filing.

3. AppFolio will generate the forms based on the vendor information you’ve already entered.

If you need to file more than 250 1099 forms, the IRS requires that they be submitted electronically. AppFolio simplifies this by generating a FIRE file that you can upload directly to the IRS’s Filing Information Returns Electronically (FIRE) system.

For businesses with fewer than 250 forms, you have the option to e-file or print the 1099s and mail them to the IRS. Either way, AppFolio gives you all the tools you need to file quickly and efficiently.

Important: Apply for a TCC for E-Filing

If you plan to e-file, be sure to apply for a Transmitter Control Code (TCC) from the IRS in advance, as this process can take up to six weeks. Without a TCC, you won’t be able to submit your 1099s electronically.

Step 6: Monitor for Compliance and Timely Vendor Payments

One of the most time-consuming aspects of 1099 preparation is managing accounts payable and ensuring that vendors are paid on time. Fortunately, AppFolio’s Smart Bill Entry feature automates much of this process by reading PDF invoices and filling in payment details automatically. This feature ensures vendors are paid promptly, minimizing issues that could arise during 1099 preparation.

Staying on top of accounts payable throughout the year makes it easier to generate accurate 1099s when tax season arrives.

By following these best practices, you’ll know exactly how to prepare 1099s in AppFolio, making the process faster and more efficient each year.

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