Lenders are audited on a regular basis, and it's millions of dollars in fines if a lender turns appraisal fees into a profit center. 

But I can almost guarantee you that a field agent auditing your return will not get it! 

We have been audited by the IRS twice-he takes care of those things completely-he is my Rottweiler when needed.

But, if audited, it will be very difficult to defend.The correct procedure is to get the contractor's SSN (have him complete Form W9 and verify against his SS card) and warn him that he will have to pay taxes on everything he was paid in 2018, including cash already paid to him.

I have no idea what the tax code says, but I've seen people write this off on Schedule C with no subsequent audits to the best of my knowledge.

Nothing furtherIt's very important for new Investors to note that in order to perform 3rd party property management services in Ohio one must be a licensed Real Estate Broker who is required to adhere to very strict accounting regulations & auditing through the Ohio Division of Real Estate.

In my County, all foreclosure auctions start bidding at 2/3rds the tax audited value. 

There are random audits, that review all aspects of a property management company; so I never understand how this can happen. 

But keeping track of it would help if ever get audited. 

If you hire them as an employee you have to pay un-employment insurance, of course you will have to pay for the company side of all the taxes, filling out schedule B, 940,941, and all the state forms, you will have to go through an audit once a year for the unemployment taxes (only taxes a few minutes but you need to know what you are doing).For one employee not usually worth all the headache.