Own a Rental Property? The IRS needs to know…

Be My Friend...

If you own ONE rental unit… from this year on, all vendors that perform at least $600 worth of work for you now, via Federal law, must be sent an IRS 1099 Form. The obligation to monitor the vendors and issue 1099 forms are not new, but last year, when the federal government enacted the Small Business Jobs Act of 2010 (HR 5297) extended this requirement to all owners, no matter how small. Even property owners who rent are just doing a secondary activity, perhaps as part of the family investment fund or retirement savings plan, are now considered to be  “conducting trade or business” to declare 1099 as it now applies to them.

Complying

Since the requirement takes effect for fiscal year 2011, you should have started noting the payments to your vendors from January. After completing your payment for the year, send workers the total on a 1099 Form in early 2012.

There are some exceptions to the obligation:

• Burden: Gathering the information and issuing the forms would create a hardship for you.
• Duration: The property is only a temporary rental of your own residence.
• Income: Your income from the rental doesn’t meet minimal threshold requiremen

More guidance is forthcoming.

I'm told yellow is the most sellable color...thoughts?

This requirement applies to all independent contractors or freelancers, who often provide services in a rental property. This includes plumbers, electricians, painters, cleaners, gardeners, landscapers, accountants and DIY cards, almost all providers of services to the property that do not receive Form W-2 from your hand, and give at least $600 in services for years. This is a cumulative, even if a painting is only $ 400, you would track it and add all the other costs of the vendor to see if the total is over $ 600, which triggers the obligation. You will want to review its accounting procedures, with the accountant you work with to make sure they have a system to track payments to its suppliers. You also need to configure the monitoring process so that you can record the method of payment: credit card, debit card, check or cash.