In an attempt to keep readers current on tax law that might affect them, here is a new one which I would have missed had I tossed one of my recent accounting journals. Recently I alerted readers to the new 1099-MISC rules that were buried deep in the Healthcare Bill and that (should they not be repealed) take affect during 2012.
A new law that is likely to escape many a landlord is currently making its way into Accounting Publications (link: Journal of Accountancy) now and is effective NOW (2011!). Starting in January 2011, those who rent real property must start tracking payments to contractors.
It is January and there is no better time to have a plan if you are a landlord. It is always easier to get your paperwork in order in advance, rather than closing out the year in January only to find that you can't properly substantiate something later. As part of the Small Business Jobs Bill Act, taxpayers who own rental property must issue 1099-MISC forms at the end of the tax year (deadline: January 31, 2012) to service providers who provided a service of $600 or more during the course of the year.
Therefore, when you hire an accountant, plumber, electrician, contractor, or painter, you need to make sure you have the name, address, and taxpayer identification number or social security number on file. Be prepared to present your service provider with a W-9 when he or she walks through your door. Since no one wants a surprise, it is always a good idea to let service providers know right from the start that you will need their Tax Identification number. No need to end up in a sticky situation come January 2012 when you are trying to meet the 1099-MISC filing deadlines and you either can't find the contractor or they won't give you their identification number.
This new regulation is certain to surprise unsuspecting landlords (and their accountants too, no doubt). Filing that first 1099-MISC can be a bit of a mystery (the filing address is printed on the 1096 transmittal form, not on the large list of where to file on the IRS website).
There are a number of online softwares to file 1099-MISC forms. If you are only filing one or two 1099s, I believe this is the most cost effective way despite the slightly higher cost per form, as the packages in the big box office stores only come with 3 1096 transmittal forms in a package. The deadline to get the 1099-MISC to your service contractors is January 31. The IRS requires 1099-MISC be transmitted by February 28 (non-electronic) or March 31 (electronic).
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10 comments:
Does this law apply to landlords renting 1 or more units or to ones renting 3 units and more?
I'm only going by the mention in the link to the Journal of Accountancy until I have further info. I'd be prepared with only 1 unit. I see no indication of 3 or more in the article.
I believe the law applies to any business. The intent is to reduce tax evasion by providing a paper trail for business expenses.
Dave, and in typical government fashion, they break out the iron glove before trying anything reasonable. Most of us would do 1099s more regularly if it wasn't a pain in the neck. Right now, the process is extremely cumbersome. Eliminate the SSN option, require EINs, and require anyone doing more than $600 in business to get an EIN, then let us look up EINs on the IRS website.
If you did that, you'd get a LOT more compliance than the current nightmare...
But I'm pretty sure the CBO doesn't score "less cumbersome process" as highly as "new law nobody can comply with."
If you pay the guy that cuts your lawn more than $600/year, time to 1099 him.
Miami Al, I couldn't agree with you more. 1099 distribution requires organization and it is difficult and costly to work backwards.
Also, while accounting software will do the work and make things managable, that is only if you know how to properly program the software. I make a few bucks getting things in order for small businesses.
Al,
Only if he cuts the lawn on your rental property.
Wasn't there always a requirement (albiet ignored) to give a 1099 to anyone who does more then $600 worth of work for you?What changed?
What Changed,
Prior to this change, you were required to provide a 1099 to any non corporation that did work for you. The corporation exemption was HUGE. Note, LLCs and other organizations were covered.
Technically, I need to 1099 my office supply company now, online vendors, etc. This is nuts.
just a follow-up to the subthred on the last post about frum jews as public school teachers:
http://www.vosizneias.com/74616/2011/01/28/new-york-ny-bloomberg-warns-of-21000-teacher-layoffs
Avoid missing out the deadline on your 1099 forms. For fillable 1099 forms or any tax http://goo.gl/7QO8iP
Download, edit, print, save, sign, email or even fax your tax form online.
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