1099 Rules for Landlords and Small Businesses

1099 Rules for Landlords and Small Businesses

 

Are you confused about the rules for small businesses and landlords 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 2016
The rules have changed several times since the original post. If you’re preparing 1099s or tax returns for tax year 2016–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 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 MISC?  Basically, if you own a business, or are a landlord, you need to issue a 1099-MISC to anyone  that you’ve paid over $600 to for labor.  So, let’s say you pay a computer programmer to set up your office system – you’d issue a 1099 MISC.  But if you buy a computer for $1000 – then you don’t.  Confused yet?

 

Okay, here’s another situation – you issue a 1099 MISC to individuals and LLCs, but not to corporations.  So, let’s say Roberg Tax Solutions prepares your business tax return for $800.  Roberg Tax Solutions is an LLC, so you think okay, I’ve got to issue a 1099 – BUT, Roberg Tax Solutions has elected to be taxed as an S Corporation.  Say what?  Now you don’t have to issue me a 1099.  How do you keep track of that?  By looking at the W9.  Make sure all contractors you work with complete a W9 form.  It will tell you if they are a corporation or not.

 

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:  W9

 

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:  Free EIN

 

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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327 thoughts on “1099 Rules for Landlords and Small Businesses

  1. Hi Joyce,
    I don’t believe that you should issue a 1099K – that’s for credit card companies. You should issue her a 1099misc for the rent you pay her.

  2. Hi Jan,

    I am a hairdresser and i rent a booth, I pay rent weekly to the lady that rents from the landlord in a shopping center. She rents out all her stations to other hairdressers as well. She is not an employer she just collects rent from us all and she pays the landlord her rent every month. Am I supposed to issue her a w-9 and then a 1099K at the end of the year? This is what my accountant is telling me, but the lady tells me different. Just looking for some straight answers. Thank you!

  3. Hello, As a small business owner I rent space for $500.00/mo from a landlord who tells me this property is owned
    by a Family Trust. Do I need to issue the Family Trust a 1099 for the 2016 rents?
    Thank you

  4. Hi there. If I have a rental through Housing Authority and they issued me a 1099 showing the deposit in box 7, how do I report it? I expected it in box 1 with the rest of the rent income to offset expenses, but I apparently can’t report Box 7 income in rental property.. did they send me an incorrect 1099?

  5. What if you paid a wedding planner a 50% deposit on all weddings your business booked for 2017? We paid over $7,500 to a wedding planner who is set up as a LLC in 2016 for services to be performed in 2017. When we book the wedding and receive a 50% deposit from the customer, we forward 50% of the wedding planner fee to the wedding planner. Should we issue a From 1099 for those deposit amounts paid?

  6. Hey Jan,

    Happy Monday.

    My wife and I own a few rental homes. We have a lawn guy that cuts the lawn and we paid him over 1000 last year. He does not have a business as it is one of our friends, but do we need to 1099 him?

  7. Hi Ivan,
    You would put the rent in box 1 for rents. The landlord should give you a W9 with his information on it so that you may issue a 1099. Although you might want to hand him a W9 form for him to fill out.

  8. I lease a spot for my business. I pay the landlord 1000 a month. The landlord is an LLC. Is rent a good or a service??? Do I need to give him a 1099.. or w9. So confused.

  9. Jan,

    I own and live on a property that has a business in the front. The business owner pays me a monthly lease of 450$. I do not own an LLC.

    What forms do I have to issue him?

    Thank you

  10. Hi Tony,
    If the HOA is making payments to a rental property – well then yes, the HOA would issue a 1099. Also, if the HOA paid a contractor for work amounting to over $600, the HOA would issue a 1099 for that as well. But – if you are a member of the HOA, you would not issue a 1099 to the HOA for your Home Owner’s Association dues payment.

  11. Hi Are,
    If you own a business and you paid rent, then whatever you paid to the landlord should go in box 1. The landlord will be deducting the taxes and utilities as expenses so you should include the entire payment.
    If you don’t own a business, there is no need for you to issue a 1099. A private citizen doesn’t need to give a landlord a 1099.

  12. if I paid rent but I also pay to them property taxes and utilities do I include the whole amount under box1?

  13. Hi Jan, as a landlord of one apartment to apply for an EIN, do you apply as a sole proprietary or others? Thank you!

  14. Hi Alanna,
    I’ve never heard of that, but I don’t live in Texas anymore. That said, issuing 1099s is a federal requirement, and federal law supercedes state law so I’d issue the 1099s anyway. I would prefer to err on the side of caution. The realtor said that Texas landlords don’t “need” to be 1099’d, but didn’t say that it was against the law to issue them.
    Okay, forget being polite, I’m going to go out on a limb here – I think that realtor is full of horse hockey! But if she can pull the IRS regs that say Texas landlords are exempt for 1099s – I’ll apologize.

  15. My company rents homes for people who have suffered fires, or another loss to their permanent home. We typically get a W9 from the landlord and will send them a 1099 at the end of the year. However, we’ve been told by a realtor that Landlords in texas don’t have to be 1099ed for the first two years that they are landlords. Is this accurate?

  16. Hi Joan,
    I think what you need is an attorney, not a tax person here. You get to write off the utilities as a business expense anyway, so issuing a 1099 to them doesn’t really help you. But an attorney can help you evict these deadbeats, that sounds like that’s what you need. Good luck!

  17. Can I 1099 renters that refused to put utilities in their name. They also didnt give me the agreed deposit. In 3 1/2 months wrecked a hoise that was on the market. They lied and sgowed false documentation thar they were going to buy it. Also wrecked brand new appliances. Put AC as high as they could left every light om 24-7 and 3 flood lights at night. They were nasty to me and made false police reports. Luckily I am smart enough to have witnesses. for all dealings. They are on drugs and somehow seems the courts let them get away with what I call rape. I am so brioke paying their bills. Help me with advice.

  18. Hi Tiffany,
    So, your invoice doesn’t meet IRS guidelines? Golly gee, I didn’t know that the IRS had guidelines for invoices. There’s a very technical accounting term that we use around the office for matters like this. The term is BULLS*IT.

    Seriously? You have a lease addendum that clearly states the terms and he’s not honoring it? I used to live in Texas, it can be pretty hot – and with no AC – it can be really nasty! And lets be real $60 is not going to be luxury digs!

    I’m thinking that you don’t need a tax person, you need a lawyer. You’ll want to ask about reducing the rent that you pay by the $60 a day that you’re owed. Is it legal to do that in your town/state whatever? That’s out of my area of expertise, but that’s the question I’d be asking your attorney.

    I’m so sorry that you’re having to deal with this. Good luck!

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