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.

______________________________________________________

Note:  We try to answer all the questions that come to us but please be patient.  It’s our busy season right now.  We may not get to your post until the weekend.  When you make a post and use the capcha code, it won’t immediately show up.  You see, for every normal person like you that posts, there’s about three advertisements for things your mother wouldn’t approve of.  (We try to keep this a G rated website.)   We have to edit those out.  If you need an answer right away, here are some links that might help:

EIC questions of any kind:  http://www.irs.gov/Individuals/Earned-Income-Tax-Credit-(EITC)-%E2%80%93–Use-the-EITC-Assistant-to-Find-Out-if-You-Should-Claim-it.

How to find free tax preparers:  http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers

How to find your local IRS office:  http://www.irs.gov/uac/Contact-Your-Local-IRS-Office-1

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.

297 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.

  5. Hi, my question is..
    I am not a landlord, I am renting a house and subletting a room in the house that I am renting (at no profit, just to pay rent). The potential tenant that I have says his employer will be paying his rent and wants me to sign a W-9 form. My only concern is that by signing this, the rent will seem as income to me, which it will not be, it will be going directly to pay the landlord that I rent to.

  6. Hi Susan,
    You can fill out the W9. You will get a 1099 showing rental income. You’ll claim that as income on your tax return, and you will show the expense as the money you pay for the rent to your landlord so it will zero out.

    Here’s my issue: do not give your social security number to this person! Go online and get an EIN number. Do not lose the EIN number. But use that for the 1099 instead of your social. Something is a little fishy to me then people rent a home space and want a W9 (It does happen, quite often actually, so it doesn’t make him a creep–it’s just a little flag.)

    But–to me, any flag means don’t give out your social security number. Here’s the IRS link: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online

  7. Does a w9 subcontractor have to be paid under a business name such as “john doe LLC” or “Johns Concrete” or can the subcontractor be paid under their legal name such as ” John Doe”?

  8. Hi Marc,
    That’s an excellent question. You don’t have to have a business name, you can have a W9 under John Doe. I get phone calls about that all the time, but I don’t think I’ve ever answered that one online.
    So you can fill out the form as John Doe and use your social security number. That’s fine. Or you can apply for an EIN number for yourself, just so that you’re not using your social security number. Just go to the IRS website and apply as a “sole proprietor.” Here’s link: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online

  9. I had to get rental assistance from salvation army but they needed my landlords w-9 form, but he doesn’t have one and he printed a blank one off the internet. I don’t know what to do, of what this means for me in terms of getting financial help? Can you please help me with an answer.

  10. sHi Orion,
    Okay, this makes sense. The Salvation Army is going to help you with your rent, which is awesome. In order to do that, they are required by law to issue a 1099 to a landlord that they pay rent to. (It keeps them out of trouble with the IRS. They can’t pay you money directly, but they can pay the landlord. It’s a technicality.)
    So, they need the W9 from your landlord. He prints a blank one from the IRS website–hey that’s great. Now all you two have to do is fill it in.
    Line one–that’s his name. Easy.
    Line 2, unless he’s named is rental business, leave that blank.
    Line 3-check the individual box (unless he owns the property as a partnership or something, but I’m guessing he just owns the building by himself.)
    Line 4- leave blank
    Lines 5 and 6 – that’s his address
    Line 7- leave blank

    Go down to part 1–he can either use his social security number or he can get an EIN number from the IRS – it takes about 5 minutes. Here’s the link: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online

    That should get you the W9 you need. Good luck.

  11. I received help through the city for my rent. The landlord received a 1099. He received $1050 for my rent and asked me to pay additional 28% of taxes. Is this legal? PLEASE HELP!!

  12. Hi Gloria,
    It sounds like your landlord did not give the city his W9 form. That’s the form that he’s got to fill out so that the city will issue him a 1099 – so that he reports his income to the IRS. If he doesn’t supply the city with his W9, then they withhold 28% of what they pay him. That’s the withholding rate for people who don’t supply the correct information on their W9.

    So what does this mean to you? Well, in my opinion – and remember, this is just my opinion, I’m not a lawyer, just a tax person– in my opinion, your landlord is trying to pull a fast one on the IRS and hide his income. He got caught and is trying to make you pay for it.

    Tell your landlord that he needs to send his W9 form to the city and he’ll get his full payment and that you aren’t responsible for his trying to cheat on his taxes. (Sorry, you’re going to want to be more diplomatic than me. I’m calling it as I see it. That’s not really the polite response.)

    You might want to say, “Excuse me, if you file a correct W9 with the city, you’ll get your full rent payment and they won’t withhold the 28% anymore.”

  13. Thank you so much. I’m I’ll, I’ve lived here for 7 years and city helped me 3 times. Once per year but my illness progressed. I’ve paid him previously 33% of my rent and I questioned him about why I had to pay him ever in past, he said he will not allow anymore help from city since I have a problem paying him the additional 28%.

  14. W9 is for payment to independant contractors for product/services to a non incorporated individual. I am incorporated as R&M Group, LLC and am not an independent contractor providing product/services. Please ensure deposit today. Thanks, Richard. Is he right sweetie

    I took your advice, this is what my landlord had to say.

  15. Hi Gloria,
    Even though your landlord is a corporation, he still has to complete the W9–you see, the paying agency doesn’t know that he’s a corporation. So, he completes the W9 showing that he is a corporation so that they know they don’t have to issue him a 1099misc. But, without the W9, the city doesn’t know he’s a corporation and they are required to withhold the 28%.

    Also, an LLC is not a corporation, it is a limited liability company–which is not a corporation. He may have elected to be taxed as a corporation, but an LLC is not a corporation. That said, even major corporations like Citibank still complete W9s.

  16. Hi Jan,

    I have a question regarding interest payments made by a company for a business loan. I requested multiple times a completed W-9 from the non-traditional lender who happens to have “Inc.” in its company name and have yet to receive a W-9 . The principal/interest payments are automatically deducted from our company’s bank account (ACH).

    Q1: As a non-financial entity, is our business required to issue a 1099-INT to a non-corporation?

    Q2: Must I get a W-9 from the business lender that certifies that the entity is a Corporation so that I know that there is no further need for reporting interest payments on a 1099-INT? (I doubt that anyone is governing/regulating against companies that use “Inc.” in their name so I am not sure that having “Inc.” in the lender’s name is enough evidence to support that the lending company is truly a corporation.)

    Thanks.

  17. Hi Dan,
    You’re not a financial institution, but you are a business, so I would still do the 1099.
    But wait! You can’t issue a 1099 because the company didn’t provide you with a W9. Hmmmm. What to do?

    I think you make a good point about the “inc” in the name, although you’re not supposed to have “Inc.” in your name if your company is not incorporated so that should cover you if you get a letter from the IRS.

    If you really suspect that the company isn’t really a corporation, you can look them up their state’s Secretary of State’s website. If they aren’t a corporation, then you have a right to push for the W9.

    This is really nasty but I’ll tell you about it anyway–if they don’t provide you with a W9, you should start back up withholding of 28%. That’s what your bank would do if you don’t give them a W9. I find that back up withholding is a rather powerful tool if you want that W9.

    But–if you do start back up withholding, you’ll actually have to send that money to the IRS. You can’t just keep the money.

  18. In addition to the base rental fee we pay to our landlord, we pay a CAM/OPs fee per month (this includes things like prop tax & cleaning of common areas). We also paid one flat sum for leasehold improvements, during the first month we moved in (this covered basic renovations, such as painting & removal of specific walls). I know we would 1099 the base rent, but what about the CAM/OPs fees & the leasehold improvement sum?
    Thanks for your help with this!

  19. Hi Jan,
    Love this site! My new resource for questions. :)
    I own a small business. I order products from China. Initially I paid via paypal. However now my orders are much too large. Now I use wire transfer. I’m guessing that I do not need to issue a 1099 because the bank does that but I use my personal account to do the transfers. Do I need to issue a 1099? I get cash out of my business account and deposit it in my account then transfer.

    Thanks!
    Gisela

  20. Hi
    I have a question. Last year I filed my own taxes thru turbo. I had asked my landlord about getting his ss no tile my 1099 for my rent. I am a small business owner and he too told me he did not do that. so when I filed I listed my retn in the appropriate location on my taxes and that was it. No 1099 and no W9. So with that said what happened did I recieve less of a credit with out the W9? I am getting ready to do my taxes this year and read your reply on how to handle the landlords that do not offer the ss no. I am just a little worried about my last year fileing and how it effected me.
    thank you
    Deb

  21. My client is the only member of his corporation and the company pays him rent. Do I need to issue him a 1099?

  22. Hello Jan,

    The company I work for is leasing a few kiosks in the mall. Do I have to include the security deposit that we pay to the landlord on the 1099Misc Form? Should it be in box 1 or 3?

    Thank you.

  23. Hello! I work for a church that is located in a neighborhood that charges association dues. Do we issue a 1099 to the association for the dues that we have paid this past year? Thank you!!

  24. Hi Deb,
    Your situation is that you’re claiming your rent for your home office deduction, right? That’s fine just the way you did it.
    Now if your business was in an office building or mall, well that would require you to file a 1099. But you’re claiming a part of the rent you pay on your personal home as a business expense, and you don’t need to issue your landlord a 1099 for that. You’re good.

  25. Hi Tammy S.
    Let me see if I understand correctly: your client is the sole member of his corporation, right? But the corporation pays rent to your client as an individual, right? I’d do the 1099. It gives you a legitimate paper trail.

  26. Hi Elina,
    Technically, the security deposit is not an expense so that won’t go on the 1099 as the landlord should not be claiming the security deposit as income. Now, if (or when) the lease is done and your company leaves the mall, if you don’t get the security deposit back, then you would include it in the 1099 and expense it.

  27. Hi Peggy,
    Generally, a homeowners association is a non-profit corporation. A corporation isn’t required to receive a 1099. I’d double check with your neighborhood association, but I’m guessing that you don’t have to issue them a 1099.

  28. Hi!!
    I Have an LLC, and i run a business of subleasing
    i make a year lease with the owner pay the month to month rent, and rent it for short stays to tourists through “Airbnb” ,my question is
    Do i need to issue a 1099 to landlords i pay rent to who doesn’t have a corporation?
    the ones who i pay into their corporation bank account i won’t need to send out a 1099..?
    i would really like to find a way avoiding sending 1099s if possible as some owners give me troubles and do not want to fill the w-9. Thankyou very much, an answer will be highly apprecated

  29. Do I need to issue a 1099 to a tenant that was evicted, but we purchased the improvements that he made in the space for $20,000? He is a sole proprietor.

    Thank you!

  30. Hi Martin,
    Yes, you issue 1099s to the individual owners if you pay over $600. You don’t have to issue 1099s to corporations. The best way to get the W9 information is to request it before you pay them anything. (Funny how easy it is to get them to sign then.)
    If they refuse to sign, then you can start withholding 28% in tax. That usually wakes them up. But the bottom line is, they should be getting 1099s. They don’t want them, because they’re probably not wanting to report the income. That’s why they came up with those 1099 rules, because people weren’t reporting income. Funny how that works.

  31. Hi Malia,
    Who did you actually pay? Did you pay the tenant $20,000? If the tenant did the improvements and you were paying for the labor then issue a 1099. If you pay contractors to do the improvements for the tenant, then you pay the contractor. Bottom line is–who did you write the check to?
    Sorry if I’m not making sense, but what I’m reading is, your tenant improved your property by $20K and then you kicked him out. I’m pretty sure that’s not what really happened. I’m thinking that you paid $20K to improve the property and he didn’t pay his rent so you kicked him out. Therefore–you paid $20k but not to the tenant, right?
    Bottom line, do the 1099 to whoever got paid for the work.

  32. I am a property manager, an owner I work for has been asked numerous times to fill in a W9 and always promises to send it over. She is now just ignoring the request an obvious avoidance. I need to send her a 1099 but I have no SS# for her .

    What can I do?

  33. Does this rule apply in ALL states? This 1099 issuance to landlord’s for commercial space I am just now learning of. I closed my retail location in Oct 2014 and the actual business Sept. 2015. I have my business taxes prepared professionally. I have never been asked for a 1099 receipt for rents paid. Should I be concerned? Should I contact the IRS? I do believe my past landlord to be very under the table, so to speak and I never received a dime of security deposit back. I did write that off as an expense as it would have been too time consuming and expensive to go to court over. I paid rents of $1,000.00/month for almost 4 years ( Feb 2011-Oct. 2014) and a $2,000.00 Security deposit.

    Thanks for any input!
    Sincerely,
    Terri- Prev. Small Business Owner

  34. Hello.
    I have a question. I hope you can give some information.
    I managed a property owned by foreign’ owner. The tenant got the payment for rent through her organization.
    So it’s like that the organization rent the house for her to live, not for doing organization business.
    She ask w8 from the owner, and also ask my ITIN, I havent give it to her.
    As i read this article, that she don’t need to file 1099 for the owner nor to the PM.
    But the PM must give the Landlord 1099,.
    Is that correct?
    What happens if the tenant give the Landlord 1099 directly?
    Or perhaps gives to both? Can she do that?

    Thank you.

  35. I own a coffee shop (LLC) that leases out an extra storage space across the street from the actual shop.
    Last year, a yoga business sub-leased it from me. (they paid my business the exact amount of rent & I just turned it over and paid it to my landlord.)

    The yoga business is now requesting that I fill out a W-9 for them. Do I need to fill this form out since it wasn’t actual income for my business? Thanks!

  36. Hi Jan,

    If I rent homes, that in turn manage and rent out as vacation homes, my first questions is: May I claim the initial rent for the homes as an expense? Verses the second rent made from vacationers as income? I the homes I rent are for the sole purpose of vacation home business.

    The next questions I have is: 2) Do I issue my the landlord, of my storage unit and office space, a 1099?

    Thank you so much for you help. Much Appreciated.

    -Bryant A.

  37. Hi Sheri,
    Well we have dirty trick number #702 to use. (I’m not sure if it’s really number 702, I just made that up, but it’s a dirty trick and it’s very effective.)
    Anyway, if you are required to submit a 1099MISC and the person you need a W9 from is not complying, the one way to get their attention is to start back up withholding. Are are required to withhold 28% of the payment as backup withholding which must be submitted to the IRS because they haven’t provided you with the proper documentation for the 1099.
    Ouch! That usually gets you a W9 pretty fast. If it doesn’t, well then your send that 28% to the IRS and the landlord will have a very difficult time getting it back because, that money went to the IRS but there was no social security number with it. Aw shucks, the IRS can’t figure out who’s money it is. (I have some personal experience with this for one of my clients. It was a bear to fix.)
    So you see, the power is all yours! And I’m not making this up. This link is from the IRS website: https://www.irs.gov/Government-Entities/Federal,-State-&-Local-Governments/Backup-Withholding

  38. Hi Terri,
    The 1099 rules are federal so they do apply to all states. Now you don’t need a 1099 receipt for your rents paid, it’s a case of you might need to issue a 1099 to the landlord. Now, many landlords are corporations so you wouldn’t even think twice about it. But if your landlord is a single owner, you might need to. If you paid your rent via credit card, you wouldn’t need to issue a 1099 either.
    Since you’re using a professional, my guess is that she’s done her due diligence and if you needed to issue something she would have done it. I wouldn’t lose any sleep over it.

  39. Hi Leli,
    You’re the property manager, right? The tenant gets money from an organization to pay her rent, but the rent comes from her, not the organization right? So, you do not need to give her a W8 or a W9 or an ITIN. She is a private citizen.
    Now, if the organization were paying you directly, that would be different.
    Now, I’m guessing that you the property manager get money for the rent, and then you give money to the landlord. So you, the property manager, issue a 1099 to the landlord.
    The 1099 comes from a business to a business. Not from an individual to a business.
    Also, a person can’t issue two 1099s for the same thing. I think you understand all that. I’m just saying it again to make sure it’s clear.

  40. Hi Amanda,
    Yes you do. It was income to your business, but you spent it – on the rent so it zeroes out. But the yoga business should issue you a 1099.

  41. Hi Bryant,
    Let me make sure that I understand. You rent homes and you are turning around and sub-leasing to other people, right? So yes, you would claim the rent you pay as an expense, and the income you make from sub-leasing as income.

    So you issue your landlord a 1099? Since you are in business of subletting those homes, then you would issue to the landlord a 1099.

Comments are closed.