During 2010, two new reporting requirements have been added to the duties of property owners and owners of small businesses(including self employed individuals and independent contractors). Both provisions are permanet.
Previously only real estate professionals engaged in property management type businesses have been required to file Form 1099. Congress has extended the Form 1099 requirement to any person who receives rental income. This requirement would apply to any landlord(including a small investor), rather than only those who are in the business of managing property.
Starting in 2011, any persons who receives rental income must provide Form 1099 for all payments of $600 or more made to service providers, such as plumbers, carpenters, yard services and repair people. The purchase of goods is not included within the reporting requirement. The Form 1099 is provided to the IRS and to the service provider. The new requirement applies to both residential and commercial property.
Additional Reporting Requirement for 2012- Small Business Goods and Services
The Health Care Reform legislation enacted earlier in 2010 adds a new, controversial and burdensome reporting requirement that goes into effect in 2012. The 2012 reporting requirement affects any business that makes a payment of $600 or more to any payee(except tax exempt organizations) for property and services. This provision expands the 1099 information requirement of the current law.
The National Association of REALTORS is participating with groups to repeal or modify this requirement.
Bottom Line for Owners of Real Estate:
2011 Rule: ALL persons who receive rental payments must provide Form 1099. This affects ALL owners(both individual and businesses) of rental properties. Thus, “mom and “pop” investors and those who invest in real estate for their personal portfolios are subject to the new reporting requirement. Only aggregate annual payments of $600 or more for services(but not goods) must be reported.
2012 Rule: All businesses, including real estate businesses, self employed individuals and independent contractos will be required to make a 1099 report of any aggregate annual payment of $600 or more to any person from whom they acquire goods and services.
The previous information has been obtained from a National Association of REALTORS Issue Brief.
If you are a business owner or investment property owner, it is highly recommended you contact your Accountant or Tax Advisor to obtain more information and begin to prepare for these new IRS Reporting Rules.
I am a business owner and an investment property owner. I have contacted my accountant and have already started the process of issuing W-9 Forms to the service providers of my income properties(lawn service, lawn mowing, repair contractors. etc) who I know where annual payments will exceed $600 this year. I rather get that paperwork done now rather than waiting until tax preparation time and I have to hurry in obtaining them. While this requirement may be a little time consuming, it is much simple compared to what I will have to do in 2012.
Not only will I have to do this again in 2012 for my income properties regarding service providers, but as a business owner I will have to this for goods purchased which exceed an aggregate annual payment of $600. If you are a business owner, think about how many people or companies you purchase goods and or services from during the year which total an aggregate amount of $600 or more. I would expect you are as surprised as I am when you start counting them.
And don’t forget, you are a business owner if you are self employed or are an independent contractor. And that includes most all real estate licensees in addition to so many other individuals. So, in 2012, those who are self-employed or who are independent contractors will also have to issue a W-9 to anyone they pay and or purchase goods and services from in an annual aggregate amount of more than $600.
Do you need the IRS Form W-9, Request for Tax Payer Identification Number and Certification? Click here.