Landlord? Get ready for 1099
Monday, February 7th, 2011
If you have property that you rent to others, the IRS says you are engaged in a trade or business beginning January 1, 2011. This means you become subject to Form 1099 rules. If you pay an individual or company (not a corporation) more than $600 in the calendar year, you must report these payments to the payee and the IRS (usually on Form 1099-MISC, the same form you may be receiving for your rental income). These individuals include, for example, your repairman, plumber, landscaper, accountant, and attorney.
Considering this, it’s a good idea to collect the information you will need as each service provider does the work for you. The IRS created Form W-9 for this purpose, but you’re not required to use it. Just make sure you get at least their name, address, and Social Security number or Employer Identification number. This will save you the hassle of tracking them down next year before the January 31 deadline.
There are exceptions to the new rule:
- An active member of the uniformed services or an employee of the intelligence community who rents your principal residence on a temporary basis;
- An individual who receives rental income below a minimal amount (the IRS has not yet established this amount);
- Any other individual for whom the requirement would cause hardship (the IRS has not yet established what would constitute hardship).
We will keep you posted as regulations are developed to more fully define this new rule, which was part of the 2010 Small Business Jobs Act. You may have heard news about repealing the 1099 reporting provision contained in the health care reform act. We have word that although Congress is considering repealing those requirements, the law’s application to landlords is likely to stand.
There may be a legitimate way to avoid the 1099 reporting rule (besides not collecting rent). We’ll tell you more about that in a future post.
One thought on “Landlord? Get ready for 1099”