1099 Rules for Landlords and Small Businesses

new laws about 1099s and W9s

Do the new tax laws make you feel like this?

Are you confused about the new rules about small businesses issuing 1099’s for anyone that they’ve paid over $600 to?  Has a company asked you to fill out a W9 form because you or your business is doing some kind of work for them?  It seems like everybody is a bit confused, even the IRS.  But here’s help.

UPDATED JANUARY 2014
The rules have changed several times since the original post. If you’re preparing 1099s or tax returns for tax year 2013–these are the updated rules.

The  1099 law is actually part of the Affordable Care Act although it has nothing to do with health care.  Is your head spinning yet?  Seriously, the new 1099 law states that businesses will be required to issue 1099 forms to contractors that they have paid over $600 to.

 

So who gets a 1099?   The law started out requiring you to issue a 1099 to anyone, including corporations that you paid over $600.  But there was a lot of backlash over that so you don’t have to issue a 1099 to a corporation now.  This eliminates a lot of 1099s!  This is great news for me because otherwise I’d be issuing 1099s to AT&T, Office Depot, my software company, my landlord, the gas station, and a dozen other businesses.  Now, at least this year, I don’t have to issue any 1099s because everyone I pay is either on my payroll, a corporation, or I paid them under $600.

 

If you need to prepare 1099s, here’s a link that will give you information on how to do it: How to Prepare a 1099

 

If you’re a landlord or small business owner you should expect that you will need to file 1099 forms for your  contract laborers this year.  Start collecting information from them now so that you’ll be prepared come January.  You’ll need a W9 form, here’s a link:  http://www.irs.gov/pub/irs-pdf/fw9.pdf

Print it out and have all of your vendors sign one.  You can be hard-nosed about this too.  No W9, no payment.  It’s that easy.

If a business that you provide a product or service to asks you to complete a W9 form, it is a legitimate request.  If you’re a sole proprietor and don’t have an EIN number, you may want to apply for one so that you’re not giving out your social security number all over the place.  If you’d like more information on EIN numbers, read my other post:  http://robergtaxsolutions.com/2010/11/how-to-get-an-ein-number-for-your-business-for-free/

You can get an EIN number directly from the IRS for free.

 

One question that I’m always asked is, “Is there any way to get out of having to issue a 1099?”  The answer is, “Yes.”  If you pay a vendor with a credit or debit card, you do not have to issue a 1099.  The reason is, when you use a credit card to pay a vendor, the credit card company will be issuing a 1099K statement showing the payment you made.  So, it you want to reduce the 1099s you have to issue, use your credit card more often.

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If you want to hire us, please call (314) 275-9160 or email us.  We do prepare returns for people all over the country (and a few foreign countries as well.)  We are sorry but we cannot prepare an EIC return for someone outside of the St. Louis area because of the due diligence requirements.

255 thoughts on “1099 Rules for Landlords and Small Businesses

  1. Hi Kim,
    Yes, your case is a perfect example of why you want to issue a 1099 to your independents. If you were to get audited, the IRS would see all those credit card statements going to your salon–meaning you. So issuing the 1099s gives you documentation of the funds going back out. (In addition to the fact that you need to do it because of the rules, it’s beneficial for you to do it. Salon owners seem to be an audit target so you want to do everything in your power to document your income and expenses well.)

  2. Hi Josh,
    yes it sounds funny but it does look like you’re both sending each other 1099s. You would send the apartment manager a 1099MISC with amounts in box 7 for non employee compensation.

    He would send you a 1099 for rents paid. (Box 3)

    On your tax return, you’ll list the full amount of the rent as income, and deduct the full amount of the management fees paid (even if they were deducted from the rent.)

  3. Hi
    I have a question….I have been in the same rental space (I am a small business) for the past 3 years, my accountant is now saying I have to 1099 my landlord. My landlord is saying he doesnt do that for anyone and is not being helpful. My accountant is scaring the crap out of me telling me if I dont that the IRS could audit me and I could pay hefty penalties. I really dont know what to do here. Can you clarify for me thanks!!!! Losing sleep!!!!

  4. Hi Jaine,
    I’m guessing that your landlord won’t give you a W9. Here are some options. If you pay by credit card–no 1099 is owed. I’m guessing you don’t, but just giving options. If your landlord is a corporation, also no 1099 is necessary.
    But I’m guessing that your landlord isn’t a corporation either. So, what you can do is this–but it’s really nasty. Sorry.
    1. File a 1099 for your landlord without an EIN or SSN. (Yes, you can do that.)
    2. Start withholding 28% of your monthly rent to pay the tax. So if your rent is $500 then you write your landlord a check for $360. When he screams-and trust me he will. Tell him that your hands are tied, you’re required by law. I repeat, YOU ARE REQUIRED BY LAW, to withhold 28% of the money you pay him for back up withholding because he would not furnish you a W9.

    I find that usually gets people to sign the W9 forms. And, it’s not your fault, blame it on your accountant. Blame the IRS. Blame me, I don’t care.

    Now if your landlord doesn’t complete a W9 for you, then you will have to start sending the 28% to the IRS. Your accountant can help with that. But I’m guessing it won’t get that far.

    If your landlord is reporting the rental income, this should be no problem. If your landlord doesn’t report the rental income–well, you’ve uncovered a tax cheat so you shouldn’t feel too guilty.

    Oh–if he wants to take you to court for non-payment of rent. Let him. You’ll have your documentation all set.

    Okay, I’m not a nice person. I would love to go after this guy.

    But you sound like a nice person, so that’s why it’s stressful for you. But remember, you’re in the right. And it shouldn’t go that far. Hopefully you can explain nicely that you need to do the 1099 thing or you’ll be forced to start withholding and he’ll see the light and do the paperwork before things get out of hand. You can be on his side, gee the IRS is such a pain, etc., etc.

    Good luck. Remember, you are a good person and you are trying to do the right thing. I’m sure you can come up with a peaceful solution to this problem.

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