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Hi Everyone
I think I know the answer to this, but want to verify -
My guest asked to pay his taxes through airbnb for the points on his card. I told him I would use the resolution center, but he’s concerned that will be a mark against him.
The language of the resolution center is somewhat negative -
What do you all think?
I don’t know if using the resolution center gives you “bad marks”, but why can’t you just change the reservation to include the tax?
because I would then pay tax on the tax
For instance, if the room rate is $100 so I increase it to $113 to cover the tax, I pay his sales and occupancy taxes on the $113, not the $100
As you fill out the tax form, just use the rental income as the basis for the tax.
But if you use the resolution center for that, then this tax paid to you will also get rolled into the total Air reports you on your 1099. Really just best to get tax in cash. Are you talking about a one time event or using resolution all the time for tax? I would not recommend that.
Airbnb is only issuing 1099s to hosts who have earned over $200,000.00 and hosted over 200 trips in the tax year. I’m pretty sure Nancy won’t get one. Even if she did receive a 1099 the amount would only come up if she were audited which is unlikely. If she were audited she could explain the situation to the auditor.
But the point is, the tax is not income. It should be separated from the income, as it’s easier to keep track of that way.
When resolution paid out on damages to my apartment, it added substantially to the total. Yes I know you can deduct it, but as far as Airbnb was concerned, it was no different than a payout.
I keep a spreadsheet of income and expenses.
Thanks @EllenN and @konacoconutz - I appreciate all the information.
This is a one-off. This guy booked last November, just when we had made the decision to revert back to collecting the taxes in cash. I did not review it with him in our messages. We launched right into how he was going to get to Dulles Airport and back. Now I’m in the habit and always include it in my first communication.
So, EllenN - are you saying I could start with my gross receipts, pull out 13%, then report to the county & state my gross less 13%, thereby paying tax only on the net receipts? @konacoconutz do you think this is legit?
I do hate having to collect the taxes this way. Since few other hosts do so it feels awkward. Some guests question it - once I explain it they are ok, but I would just rather not have to do it this way.
This is absolutely true. we run a business that has to collect sales tax. We add the sales tax, as required by law, to the invoice, and then monthly, send the sales tax to the state. On our taxes, we have gross revenue, which includes EVERYTHING, and then we put the amount of the sales tax as one of the deductions. The net income doesn’t include the taxes or any other costs directly attributable to the business.
EDITED TO ADD: The line on your Schedule C is called Taxes and Licenses. I track this in my accounting program so that it does the math at the end of the year.
What I mean to say is this.
Say I want $100 for the room.
Guest pays $100 for the room but then owes 13% in taxes - and keep in mind this is the tax for the GUEST to pay - it’s not my tax.
I can
A) charge $100 for the room, pay the $13 taxes out of my pocket, and net only $87 or
B) charge $100 for the room, collect the $13 tax from my guest, and net $100
C) Charge $113 for the room, pay the $15 taxes out of my pocket, and net $98 or
D) Charge $100 for the room, but when I complete my tax form I remove $11 from my gross to reduce my tax basis to $89. $89*.13=$11.57. I then net $88.43
Writing out the scenarios like this it actually looks like my best option is option ‘C’ so I don’t have to deal with the confusion with my guests, and recording the cash received for each guest.
I just hate this since most places in the world don’t have to worry with it. I’m a black-and-white kind of person. I want THEM to pay THEIR tax.
And this has everything to do with sales & occupancy returns, not federal.
I have paid occupancy taxes in Spain, England, Turkey, France, and Iceland. It is rather common actually. The tax has generally been added to the room rate as a separate fee, a mechanism that AirBNB has not, for some reason, implemented. Since I was paying, I have no idea whether the platform booking fee was calculated based on the room fee, or room fee + tax.
Yes, Nancy; I keep a spreadsheet with the details of the guests’ stay: Gross price of the stay, Airbnb’s fee, net price of the stay, cleaning fee, cash payments or refunds (usually for extra guests or for extra guests not staying the full time). It’s also handy for keeping notes on the guests. Thankfully, Airbnb is now collecting the Transient Occupancy Tax for Los Angeles so the spreadsheet is now solely for income tax. I used the spreadsheet formula to calculate 14% and to give me the total of what I needed to send to the city. I send this spreadsheet to my CPA on March 1, June1, September 1 and December 1 so that he can assess whether I need to make quarterly estimated tax payments.If you PM me your email address I will be glad to send you the spreadsheet.
I’m not seeing my option here, which is to collect tax in cash on my payout.
I charge $100 for the room. I net $97 so collect 13.45% from the guest in cash on the $97. Report the gross payout amount on my excise and occupancy returns.
It is on the guest to pay the tax. When I stayed at the Normandy DC I paid $79 per night. AND 14% DC hotel tax. I didn’t pay $79 even.
Yeah, it’s option B - which I currently do - oh, except I charge the tax on their room rate, not my take.
Yep, I know - I just booked through booking.com and sure enough, I paid one rate for the room, and at ‘check-out’ had to pay the tax.
But since so many of my guests are used to having it all rolled into their total, they get confused as to why they are having to pay me additional cash. Once I explain it, they are fine with it, but I had that middle part.