1099 Rules for Landlords and Small Businesses
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.
The new 1099 law: It’s actually part of the Health 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 give 1099 forms to anyone that they have paid over $600 to.
How is this different from before, didn’t we have to supply 1099s to anyone we paid $600 or more to for miscellaneous income? Well, yes, you gave one to individuals who did work for you, but you never had to supply one to a corporation before. For example: my business pays the Regus Corporation $900 a month for the rent on my office. Since they were a corporation, I never had to prepare a 1099 for them. Beginning in 2013, I will have to issue Regus a 1099, along with several other companies that I’ve paid over the course of the year for any money that I paid them in 2012.
If this bill doesn’t go into effect until 2012, why are companies asking me to complete a W9 now? A couple of reasons actually: First, the law was originally supposed to begin with tax year 2011 but that was changed. Some folks didn’t get the message that the rule’s been delayed for small businesses by a year. Some companies are fully aware of the change but are getting into the habit of getting W9’s from everybody now to make the transition easier next year. I’ve already seen a memo from one major corporation that states they’re collecting W9 information from all of their vendors now. They don’t want to be caught off guard next year. And one final reason, although businesses have been let off the hook until 2012, landlords haven’t. If you own rental property and you pay other businesses, you must issue 1099s to any company that you pay over $600 to beginning in 2012 for the tax year 2011. That means you have to start collecting W9s from your vendors now.
Why are landlords getting singled out? I have no idea. Perhaps they don’t have as strong a lobby as the small business people do. Legislation keeps going before Congress to stop the 1099 requirement for small businesses and it doesn’t pass, but there is no mention of the landlords. Landlords did not get an extension until 2012 like the small businesses did. And it’s not getting any publicity. If you go to the IRS website to research this, you won’t find any mention of landlords being required to file 1099s. The only reason I know about the landlord requirement is because I attended an IRS training where they told me, “remember, small businesses get a delay until 2012 but landlords don’t.” That was pretty much the extent of that part of the training. Part of it may be because there are some kinks in the rules that haven’t been ironed out yet. I’ve heard a lot of discussion about payments made with a credit card might be exempt from the 1099 ruling, but I’ve yet to see an IRS determination letter about that.
In the meantime, if you’re a landlord you should expect that you will need to file 1099 forms for many of your vendors next year. Start collecting information from them now so that you’ll be prepared come January of 2012. 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.
The new rules concerning 1099s and W9s are confusing. I’ll post more information as I get it. For now, landlords, start collecting W9 data. Small businesses, you’ve got a year to wait, but don’t be surprised if you’re asked to complete some paperwork now.
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