1099 Reporting for Rental Property: What Lawyers Are Saying

Here’s a quick legal reading list to help you make sense of the new 1099 reporting requirements for rental properties. The new rules affect both landlords and tenants, including businesses paying rent for office/work space(s) – be sure you know what’s required of you:

Information Reporting for Rental Property Activities (by Green & Seifter):

“The Small Business Jobs Act of 2010 added new reporting requirements relating to rental property expenses. Pursuant to Section 6041(a) of the Internal Revenue Code, all persons engaged in a trade or business are required to report certain payments made of $600 or more, providing information regarding the recipient of such payment.

A person receiving rental income from real estate is deemed to be engaged in a trade or business for purposes of Section 6041(a). The reporting burden is therefore imposed upon individuals engaged in passive real estate rental activities. This new provision will impose the reporting obligation upon significant numbers of individuals not currently subject to the requirements…” Read on»

Expanded 1099 Reporting for Rental Property Owners (by Duane Morris):

“Beginning in 2011, recipients of rental income from real estate will be subject to the same information-reporting requirements as taxpayers engaged in a trade or business. Under the SBA, owners of real property who receive rental income will be required to issue a Form 1099-MISC to report payments totaling $600 or more during the course of the year for any expenses related to their rental properties. The provision will apply to payments made after December 31, 2010, and will include payments made to plumbers, carpenters or exterminators in the course of generating rental income.The following penalties for failure to file a required Form 1099 will be in effect for tax year 2011…” Read on»

[Also see from Duane Morris: Small Business Jobs Act Contains Breaks for Businesses and Individuals…]

Tax Reporting Requirements for Landlords (by Darrin Mish, Tampa Tax Attorney):

“If you are a temporary landlord who rents out your property only for a temporary period because of certain circumstances (like going overseas for a few months), you are excluded from the requirements of the bill. Also if you are a member of the military or ‘intelligence community’ or anyone who genuinely cannot comply with the bill due to hardship it may impose are exempted. The defnition of ‘hardship’ will be clearly made in the regulations by the Secretary of the Treasury.

As a landlord, you also have to furnish the Social Security number (or Employer Identification number for businesses) of the contractor you engage. Contractors who are not permitted to work in the US will not have any Social Security numbers, or they may provide fake ones. If the IRS discovers a fake SSN in your 1099, it will pursue you. Typically, the IRS will demand that you initiate withholding tax for that worker within 30 days of being informed by the IRS starting from the time you engaged the contractor. In other words, the IRS will assume you as the employer of the contractor.

These regulations can be found in the IRS Publication 1281…” Read on»

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