New Rental payment method
Hi. With the feds now monitoring all digital money transactions (Zelle, Cashapp, Venmo, etc) should we explore other methods of accepting rental payments ?
I wouldn't see the need to change payment form unless you are understating your rents when filing your taxes. The venmo app provides an easy method of collecting rent while providing proof to both parties without the need a formal receipt such as you would want to provide with cash payments.
Are you asking so that you can avoid taxes on your rental income? Just take cash and keep it in your mattress :)
If you want to upgrade your payment system, there are a few apps that seem to do great.
Being a professional landlord, you need to keep professional records - and you will probably have to pay some taxes from time to time. We also get great writeoffs.
I would not recommend the apps you mentioned for rent, because they don't help with record-keeping very well.
I have been using apartments.com (formerly cozy) to have my renters pay me. My favorite thing about it is the automatic late fee you can setup.
If they don't pay on time, it tacks on a fee and sends an alert.
You don't have to listen to some sob story about why it was late each month. I was bad about letting people off on the late fees, now "it's not me, it is the app. It is automated. If the app made a mistake, I am sure they will reimburse you."
There are some other apps, including one mentioned in the bigger pockets podcast. Was it RentRedi or RentPerfect?
You can also keep your expenses in there too.
We get all the benefits of depreciation, appreciation, debt paydown, cashflow...so, I like using rent payment apps to keep good records of income.
The records help a lot when applying for a loan as well, I just send my mortgage broker a printout for the properties they request.
Easy Peasy.
What purpose would that serve? Are you looking to avoid claiming rental income?
#2 Marketing Your Property Contributor
Why? You claim your rent as income on your taxes.
I'd recommend a landlord-specific rent collection app anyway as you can set up auto-payments, schedule late fees, send invoices and more.
Apps like Paypal and Venmo don't have any additional property management features so it makes more sense to use a platform that allows you to do everything from one place (rent collection, income and expense tracking, report generation, etc).
No I'm not trying to avoid taxes. I wasnt sure how this affected landlords and if it makes distinguishing rental income for tax purposes more confusing. Sounds like a dumb question maybe but this is my first year. Thanks all for the comments and suggestions.
That $600 law has always been around, this is simply the IRS catching up to 2022 and applying it to mobile apps. As long as you are reporting your rental income you are fine.
As always, definitely speak to your accountant in your state regarding specific scenarios. I have seen a lot of this and I think that if you already have a system in place there will probably be no change. If you have always been collecting rent with venmo and have always been reporting it on your taxes then nothing needs to change.
Typically if you freelance work somewhere and the amount was less than the 600, then while you still should report it and you generally do not have to pay self employment tax. But if you freelanced at that same place again and say now the total was >600, typically they would issue you a 1099. I think thats what this whole zelle/venmo etc... transaction was about. It was to make sure that if you are “earning” income >600 that you are reporting it properly to the IRS.
As a side note, people always use Zelle/Venmo for “gift” payments. These are not subject to reporting, unless of course they are over the lifetime limit which is an extraordinary amount!
Other than it shouldn't matter since you'd be reporting rental payments anyway, I think its more "complicated" than what they are making out. Some other news articles referring to needing to make a business and checkinga box indicating whether the transaction is a payment for goods and services or just a personal transfer...
I like using venmo or zell for tenants to pay rent. It's even in the lease as the payment method. We will just get a new tax doc from them for 2022 taxes to give the accountant. As long as you are recording and reporting everything correctly it shouldn't be a problem.
as for landlord management so far I use Stessa which links to my business account and mortgages to track rents, mortgage payments, capital expenses and maintenance. I review it weekly for like 5 minutes to make sure things are in the correct categories (income vs expense) It takes some getting use to but so far has been a good combination.