How to Comply with Employment Laws and Accounting Requirements for Your Individual Property Manager
If you hire an individual to manage one or more properties for you, you become an employer (if you aren’t one already) and subject to a host of additional laws and accounting tasks, including the following:
Verifying employment eligibility: The Immigration Reform and Control Act (IRCA) requires that you verify any new employee’s identity and complete and submit a United States Citizen and Immigration Services (USCIS) Form I-9 Employment Eligibility Verification form.
Reporting your newly hired employee: Shortly after hiring a property manager (or anyone else to work for you), you must report your new hire to a designated state agency. The Office of Child Support Enforcement (OCSE) and state agencies use this information to track down parents who owe child support. (Visit the Administration for Children and Families website for more info.)
Paying minimum wage and overtime: As an employer, you must comply with the Fair Labor Standards Act (FLSA), which establishes standards for minimum wages and overtime pay and recordkeeping, and with the Equal Pay Act, which requires that you pay men and women equally for doing the same work. (Visit the US Department of Labor website for more about the FLSA and other labor laws.)
Minimum wage and overtime requirements generally apply only to blue-collar workers (generally people who perform manual labor for an hourly wage), which the FLSA refers to as non-exempt employees. White-collar workers (executives, administrators, professionals, and some computer specialists who typically are paid a salary) are exempt from minimum wage and overtime pay, if they meet specific criteria.
Paying unemployment taxes and worker’s compensation: You must pay the federal unemployment tax and perhaps pay into any state unemployment fund. You may also be required to purchase worker’s compensation insurance to cover medical expenses and a portion of an employee’s pay if the employee gets injured on the job.
Withholding taxes and paying FICA: Have your property manager complete IRS Form W-4: Employee Withholding Allowance Certificate. When you pay your property manager, you must withhold income tax (federal and usually state and local) and your employee’s portion of any Federal Insurance Contributions Act (FICA) payments and turn these amounts, along with your (employer’s) share of FICA payments, over to the various taxing authorities on a quarterly basis.
Don’t try to dodge your responsibilities for withholding taxes, paying FICA, and providing worker’s compensation insurance for employees by declaring an employee an independent contractor. To qualify as an independent contractor, the person must:
Be truly independent
Decide when, where, and how to perform their work
Work for several clients
Set his hours, pay, and schedule
If you include rent reduction as compensation to a property manager, you’re not required to withhold or pay any federal payroll taxes (income tax or FICA) on rent reduction, as long as the following three conditions are met:
The property manager’s employment is conditional upon him living onsite.
The rent or rent reduction is for a unit that’s part of your rental property.
You’re furnishing the lodging as a matter of your convenience.