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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Hi Jawanna,
Thanks for posting your question. I keep getting asked that on the phone–thanks for giving me a chance to write about it.
You don’t issue a 1099 to your tenants. You’re not paying them rent. It’s the other way around. Let’s say I was renting my office space from you and I was paying you $100 a month for my office. Then because I own a business I would write a 1099 to your with $1200 in box one.
(Okay business owners–before you all jump on me–we don’t have to do that for 2011, that got changed as well.)
One less papework job for you to handle!
Now–I don’t know what state you’re in, but here in Missouri, landlords do give out statements of rent paid to tenants (or at least senior citizens and disabled people) so that they can claim their property tax credit. But that doesn’t go on a 1099.
If you have to do something like that for your state, you’d be listing the total rent received.
Good Afternoon,
When filling out 1099’s as a property manager, what do I include as rents in box 1? Is it total income received from tenants or proceeds after deductions that went to owners?
Thank you in advance…
Thanks so much for all the information!!!
Okay Anne–I’ve got information for you!
1. You EIN number is your EIN number and even if you got it yesterday, you may still use it for your 2011 taxes and that accountant should issue you your 1099 with the EIN number.
2. Your EIN number is valid immediately after you receive it. (Like 5 minutes after you apply for it if you’re doing it online.)
3. This is the part that I found very interesting–your EIN number is proprietary information. That accountant cannot call up the IRS and get EIN informaton on you without a power of attorney.
4. This is also important–let’s say that you were the bad guy and you gave them a fake EIN (you wouldn’t, but if you were.) By signing the W9 form and giving it to them, that’s their proof that they have complied with the tax law (and that you were at fault.) So they’re protected no matter what.
Bottom line–my advice still holds–don’t give them your social security number, use your EIN. Hang onto it because you’re going to use that from no on when dealing with things about that property.
And thanks to S.A. at the IRS who wouldn’t let me use her name, but she was really helpful about a whole bunch of issues with 1099s and W9s.
Anne,
Sorry it’s taking me so long to get back to you–it’s been a busy day. I tried calling the IRS just now but their closed (they cut back their hours, I’m guessing due to budget cuts.)
I understand you not being in the system yet–you just signed up. I’m not so sure about you not being allowed to have an EIN number–that doesn’t jive with me–especially with the IRS sending out massive warnings about identity theft (just got another one today.)
I’ll try to have an answer for you by tomorrow or Thursday–don’t give your social security number to someone you don’t trust. I’m feeling something’s fishy, but I’ll admit it if I’m wrong.
Thank you for your response to my previous question on January 12th about receiving rental money for pasture land. We applied and received an EIN number. (We did this by phone.) The dairies bookkeeper/accountant says that she got a message that the number is not currently issued. I asked if that is because it was recently issued. Her reply via email:
“Since the EIN was just recently applied for, it would not be in the system yet. However, for reporting purposes for 2011 (the year the rent was paid) we would have to report that using his social security number. Also, if we report the rent being paid to an individual, the only number the IRS will allow is a social security number.”
Her response is contrary to what you said about the EIN number being okay and we should not give them our social security number. Please help!
Hi Lisa,
Your question makes perfect sense, and since I just finished an IRS webinar about that subject I feel ready to answer your question. (Sometimes timing really is everything!)
Even though I’m an accountant, I like to keep the math simple (although it does scare my clients when I count on my fingers.) Let’s just say that one of your sessions costs $100 even. You bill your client $100, he pays you by credit card, and your credit card agency (in this case Square) bills you $5 for the privilege of using their service.
In your accounting you will show $100 in revenue and $5 in expenses (for the credit card fees.)
Now in your line of work, I don’t expect you to be offering cash back like they do at the grocery store, but if you did, let’s say your client pays you $100, wants $20 cash back, and you’ve got the $5 expense for the credit card service. You would get a statement from the credit card company showing revenue of $120–so you would have a line item expensing the cash back, and another line item for the $5 fee.
So for your business Lisa, you should be okay–I’m thinking that your credit card revenues and income should match up without any problems and you’ll expense the credit card fees separately. Business owners who offer cash back, or have their customers charge tips could have some serious bookkeeping issues.
The bottom line is that whatever is charged to the credit card will be counted as revenue to the business owner when the 1099k comes out. If the customer is charging things that are not income to you–you’ll have to account for it in your expenses.
I hope I made that clear for you. It’s a great question.
Thanks. I am just starting to accept credit payments for sessions via Square. In planning for how to list this in my 2012 record keeping, do I list the amount the client paid, and then show the percentage taken by Square as an expense – will my gross receipts reflect the session amount, or the reduced amount after Square fees? Hope my question makes sense. I use Excel to track everything. I assume with the new procedures they (credit card companies) will be producing some sort of tax form at year end showing the total amount charged minus their percentage? Just want to be keeping track correctly in my own record keeping as the year begins.
Hi Lisa,
You’re absolutely right–those changes have been delayed for 2012. Don’t be surprised if they get delayed again, but assume they will go into effect this year just to be safe.
For now, the only 1099s that you need to be worried about are for payments that you made to independent contractors–if you hired any. All the other stuff has been postponed until next year.
Just as a fair warning- you’ll see spaces for the 1099K credit card income on your tax return form. If you’re using computer software, you won’t be able to access it because you won’t be receiving any 1099k forms. (Or so we think anyway.) If you’re doing your return by hand–leave that line blank and put all of your income on the next line. (You’ll see what I’m talking about when you look at the tax return.)
I am a psychotherapist in private practice and have received this notification several times on a list serve and want to make sure that it is accurate?; from what I have been reading it appears that some changes have been delayed to tax year 2012. Thanks:
2 VERY IMPORTANT TAX ISSUES FOR 2011
#1—REPORTING OF FILING 1099s NOW MANDATORY
Any taxpayer who owns a business and pays a total of $600 or more to an individual during the year for rent, contract services, consultation or any other service that is deducted as a business expense in 2011 must issue the provider of the service a 1099. This does not include payments made to corporations.
The deadline for submitting the forms to recipients is January 31 and to the IRS by February 28th.
The taxpayer will be required to indicate on the tax return whether they have filed the 1099s or not. There are significant penalties for not filing 1099s.
#2—NEW INCOME REPORTING REQUIREMENTS FOR BUSINESSES THAT ACCEPT CREDIT CARDS
The reporting of all business income in 2011 and beyond must now be separated between income received by credit card vs check or cash. This distinction will be required to be reported on the tax return. Taxpayers should adjust their bookkeeping practices to account for this requirement.
Hi Amy,
Let me be 100% honest with you–I think you know more about this than I do. You’ve done your research and you have experience to back up your assumptions, so I think you know your stuff. My gut reaction is that the 1099 you receive should be for RENTS, and that your husband will receive a W2 for his wage portion of the work. At least that’s my gut reaction and I’m thinking that’s where you’re coming from too.
Just to be safe though–there are tax firms that specialize in trucking–that’s all they do is tax returns for truckers. I would call one of them and just get a second opinion. I can say, “I think this is how it is,” but they’ll be able to tell you exactly how it goes and have some extra knowledge to add in there to boot. Sorry I couldn’t help.
Hi,
I have a question regarding 1099 reporting for an owner/operator of a single auto trasport truck. My husband and I own an auto transport truck. He is leased onto a company that by contract has exclusive use of our equipment and my husband is contracted as its driver. Recently they began paying him both a 1099 percentage and a W4 percentage. For example, if he were to gross $10,000, the company takes 20%, netting him $8,000. They would then calculate 10% of the $10,000, or $1,000 and deduct that fromt he $8,000. We would receive $7,000 net 1099 income and $1,000 gross W4 income.
In reading the IRS 1099-Misc instructions, I believe the 1099 income ($7,000 in the example above) would qualify as RENTS. This income was earned because the company contracted our equipment to do the job. The IRS instructions state “If the machine rental is part of a contract that also includes the use of the machine and the operator, the rental should be prorated between the rent of the machine (reported in box 1) and the operator’s charge (reported as nonemployee compensation in box 7)”.
About 10 years ago my husband worked for a national transportation company for 5 years also as an owner operatoor with the same type of eguipment doing th eexact same type of work. They listed all 1099 income under Box 1 and he also received a W4 driver check based on a percentage of his weekly gross. We were never audited during that time and our accountant saw no issue iwht. Because it was not subject to self employment tax, it was also very beneficial to us.
I’d like your opinion on how you think our 1099 income should be catagorized. Thank you.
Hi Anne,
Thanks for your question, I’m getting a lot of phone calls on that too. I just sat through two different classes that kind of had different answers on that issue—so I’m going to take the more conservative route. If I were the accountant for the dairy, I’ll tell them to issue you a 1099 for the land that you lease them.
But I’m talking to you—and I’m advising you not give them your social security number—especially since you said that you don’t trust them. I wouldn’t do it even if you did trust them. You should definitely get an EIN number. Here’s a link with some information on that: http://robergtaxsolutions.com/2010/11/how-to-get-an-ein-number-for-your-business-for-free/
That’s one of my posts but there are links to take you to the IRS website. It’s free, it’s fairly easy, and shouldn’t take you very long to do. Where it asks for the category—you’ll say other and if you’re supposed to fill in the blank say rental real estate. You can do it online.
Now when you get your 1099 from the dairy, make sure that the money they paid you is in box 1 for rent and not box 7 which is non-employee compensation. (I see a lot of mistakes like that.) Money in box 7 is taxed at a higher rate and that’s not your situation, yours is rental income.
But the bottom line is, I think the 1099 is okay in this situation and having the EIN number protects your identity. You’ll use it from now on for that rental property, so don’t lose it.
We inherited some pasture land this year and received some rental money for it. The person who was renting it this year will not be renting it next year because we do not trust them. They run a small dairy so I’m assuming that is a business. They have asked for a social security number for a 1099. Do they need to give us a 1099? Also, because of this pasture land, do we qualify to get an EIN number?
Hi Charlotte,
It’s proper that you received a 1099 from the corporate office. I’m guessing that you’re a sole proprietor and that you made over $600 this year. If that’s the case, then the corporate office is required by law to issue you a 1099 MISC form. If you didn’t receive a 1099 last year, it could be that you made less than $600 or it could be an “oopsie”. But the IRS has really cracked down on 1099s so there will be fewer “oopsies” out there.
One helpful hint when doing your schedule C–make line items for all of your 1099 MISC forms. For example: let’s say your total income was $5000. You got a 1099MISC from Big Company for $2500, and a 1099MISC from little company for $1000 and you recieved another $1500 from other miscellaneous sources.
Your tax return should have:
1099MISC Big Company 2500
1099MISC little company 1000
Other income 1500
Most software programs will have a place to enter your 1099s separately, but if you don’t have that, do use the line items. The IRS gets those 1099s and you want them to be able to recognize that you reported that income. Listing it out may save you an audit letter.
Hello, my husband and I are self employed. We bought a franchise last year. We are paid with automatiac deposit direct into out Business account. We filled out a w9 form and we do not receive a check in our name, only paid to our business name, why is the corporate office reporting to irs with a 1099 ? We did not receive a 1099 from the corporate office to file on our last years taxes. Confused.
Perfect! Just as I figured. Thank you confirming my suspicions, Jan!
Happy Holidays to you as well!
Hi Adena,
Good question, mostly because everyone is confused still! This link: http://www.bloomberg.com/news/2011-04-14/obama-signs-law-repealing-business-tax-reporting-mandate-1-.html talks about how the law requiring 1099s for everyone was repealed last April. Now you know Congress, they can change their mind, but I think you’re safe for 2012 at least.
You will not be required to get a W-9 from every vendor, only the individuals. For example: if you shop at 7-11 for your business, you don’t need a W9 from them (7-11? how lame, first thing that popped into my head.) But say you hired Jill Smith to do some contract work for you, then you’d still need the W9 and you’d issue a 1099 to her if she earned over $600 from you.
Now as far as the owners/managers expenses that you are reimbursing–that’s different. you’re not paying them for something, it’s a reimbursement check and you don’t need to issue a 1099 for that.
Hope that helps. Have a great 2012!
Also, what about owners/ managers expenses? They are acquired by the managers/ owners using their own CC/ DC but reimbursed by the company by either check or cash.
Ok, so let me just clarify what I understand to be true.
1. I must require a W9 from EVERY vendor we do business with daily with exception to the ones we pay by Credit or Debit card.
2. I must issue a 1099 to EVERY vendor we do business with for which we paid $600+ for any and all products or services (except those paid by CC or DC).
3. This begins 2012 tax year.
Jan-
Thank you so much for confirming my “gut reaction” to this situation.
She has been an awesome tenant; paid on time, done minor repairs herself, kept up the property, etc. The lease IS set up with her as an individual with a clause excluding running a business from the property. We have overlooked that for a number of reasons. It is a “low-traffic” business and it does provide her with the income that pays the rent!
Thanks again for your clear and insightful help with this issue! You have given me the ammo to go forward and resolve this without being party to potentially fraudulent activity.
Hi Chris,
Thank you for your question. You do not have to complete a W9 for your tenant and your tenant does not have to give you a 1099 for the rent on her personal residence.
Forgive me for going snarky on you but What the ##&% is wrong with that accountant? Okay, I’ll try to go back to being nice me again. I’m assuming that the accountant has misinterpreted some of the rulings concerning 1099 reporting and that’s why he’s off base. Because your tenant has a personal residence in your building, and is renting from you as an individual and not as a business, then there is no W9 requirement whatsover. You are not contract labor to your tenant. That’s the law, that’s my answer and I stick by it.
Why am I snarky over the accountant? Because, having you prepare a W9 so that your tenant can send you a 1099 for her rent–besides being technically wrong, is leaning towards “illegal” reporting and that’s what has me cheesed off. When a person claims a home office, they deduct a portion–key word here is “portion” of their rent used for the home office. It goes on a form 8829 and the pro-rated share of rent and other expenses are deducted on that form. Also, if the business is running at a loss, the home office deduction is limited. (Sorry if I’m getting too technical.)
But, if your tenant issues you a 1099 then she counts the rent as a 100% business expense. In that case the loss isn’t limited and she’s getting a full write off for something that should be a portion of her business. But that’s not a fair, accurate, or legal deduction.
This is leaving me with two conclusions: either the accountant is dumb or crooked.
Sorry, I’m usually not so judgmental. As an ex-landlord myself, I’d be tempted to issue an eviction notice on the grounds that your tenant is not allowed to run a commercial establishment in a residential building. Clearly, the only reason for you to complete a W9 would be if you were indeed in the business of leasing out a commerical property to businesses.
Jan-
I accidentally came across your website and I am glad I did!
My TENANT is asking ME (The LANDLORD) for a W-9 for the rent payments she paid me. She runs a business from her home and wants me to fill out a W-9 with MY information on it for her accountant.
She claims her accountant is correct in asking for this. What do you think her accountant is thinking? And what do you suggest I say to her accountant to get this straightened out?
Thanks for any insight you may have! I will look forward to your reply!
Hi Narisa,
I honestly don’t know the answer to that question. Here in Missouri, we don’t charge excise taxes on apartment rentals so that wouldn’t be a problem here. I know that Hawaii is a state that uses the GE tax license, but even threre I don’t know if it applies to apartment mangers or not. Sorry I couldn’t help you.
I have a lanlord that.don’t have ge license is that ok or can they get penalty? Thank u
The 1099 bill repealing the requirments was signed into law on April 14th. Here’s the link: http://www.bloomberg.com/news/2011-04-14/obama-signs-law-repealing-business-tax-reporting-mandate-1-.html
Today, April 5, the Senate passed HR4 which repeals the increased reporting requirements for Landlords and small business owners. It’s now heading off to the President’s office for signature. This link is to the actual bill itself. http://www.gpo.gov/fdsys/pkg/BILLS-112hr4pcs/pdf/BILLS-112hr4pcs.pdf
One of the issues is would the final bill include the landlord provision, and yes it does. If you go to page 2, and scroll down to section 3 (reference line 22) that’s where it talks about rental property expenses–so Landlords, you’re included! The President is expected to sign. I’ll post an update when we’ve got one.
Okay, that House Bill will be going up for a vote in the Senate on Tuesday, April 5th. It’s expected to pass and go to the President for signature. Here’s a link for more information. http://thehill.com/blogs/on-the-money/domestic-taxes/153205-senate-lines-up-1099-repeal-bill-for-tuesday
The House passed HR 4 to repeal the 1099 reporting requirements for small business and landlords. Now it goes to the Senate. The Senate had been working on a different bill. Nothiing’s law until the president signs it but it looks like we’re making progress. The attached website has more information.
http://www.govtrack.us/congress/bill.xpd?bill=h112-4
I’m not sure but it looks like the bill has been repealed but it talks about only landlords. I thought this 1099 bill-Small Business Paperwork Mandate Elmination Act was directed to all people in business that spent in excess of $600 a year to vendors? But all I can find is where it was repealed for landlords. So where does this leave the rest of us? Do you know?
Thank you very much for that tip Admin. Roberg. We DO pay for all our fuel with credit cards now. Before, we paid cash but since diesel fuel rose so high starting with the 90’s and is still rising, I am afraid for my husband to have to keep that much cash on him. So we do that. That would be a GREAT thing if all the fuel by per truckstop if paid by credit card were exempt. Thanks!!
The OOIDA has written a letter to Congress trying to get all our resprestatives to repeal this bill. I never knew it was snunk in along with the Healthcare bill. Very sneaky. I also wrote to mine too telling him what a hardship this would bring to all sole proprietors and small businesses. We’re just the little people trying to make a living.
I agree with you completely. I think that having to write 1099s for every vendor you use could be a royal pain. Congress keeps saying they’re going to do something about it, but it never seems to get anywhere.
Here’s a tip for you though: Use credit or debit cards on the road. According to the IRS, since the credit card companies will be required to prepared information documents as well, if you pay vendors with a credit card, that exempts you from having to prepare a 1099. It won’t solve all of your 1099 problems, but it will certainly eliminate a large number of them.
I just recently wrote my representative because our family are truckers. We are owner-operators, a one truck business. So if this passes, the 1099 bill, I guess we are expected to generate 1099’s to every truck stop we buy fuel from and every tire company we get tires from if we spend in excess of $600. Is that right? This is ridiculous. Can you imagine the number of 1099’s I’ll have to make up since my husband visits hundreds in a years time? Plus we already get 1099’s from brokers we do business with so does that work vice versa too? A stupid, stupid bill.
Hi Ken,
You ask a really good question. You probably don’t even realize just how good of a question that is. But seriously, what really does constitute a landlord? Is it the guy who couldn’t sell his house when he moved and became a landlord by default? Or do you have to own a couple of rental units to be a landlord? Where do you draw the line?
To be honest, I think there will be some legislation about that coming from Congress. But for now, I wouldn’t hold my breath. Bottom line, assume that anyone filing a schedule E with rental income on it will be considered to be a landlord as far as the reporting requirements are concerned.
That said, I do expect something to happen in Congress. I know that Senator Olympia Snowe offered up legislation to help ease the burden on landlords, but they didn’t let it out of committee. I don’t know what might be coming.
When I get a definitive update, I will post it here. Thanks for your question, sorry I don’t have a better answer for you.
Could you tell me, for purposes of the newly revised 1099 reporting requirements for landlords, what qualifies as being a landlord. If you have one rental property? Make your living by being a landlord? Own one 8 unit apartment building but have a full time job in another field?
Thanks.
Hi Denko,
I understand your confusion. Hopefully this will help. First, here’s the IRS website to get the W9, just to make sure you’ve got the right form. http://www.irs.gov/pub/irs-pdf/fw9.pdf
You put all your information in the boxes and send it to the insurance company. They will use the W9 form to issue you a 1099 in January next year. The W9 isn’t to open a business, it’s to identify you as a person (or company) that will be doing service work. It’s normal for the insurance company to ask you to fill out the form.
Now, here’s another possible issue for you. It sounds to me like you own your own business. If you have an EIN number, then that’s the number you put in part 1, the taxpayer identification number. (EIN stands for Employer Identification Number, you don’t need to be an employer to get an EIN anymore.) If you don’t have an EIN number, then you can use your social security number.
But, I don’t like using a social security number because of all the identity theft creeps out there. You’re probably okay giving your SS# to an insurance company, but you’re going to get asked to fill out more W9s in the future. I’d go ahead and get the EIN number now. It doesn’t cost anything and it takes about 5-10 minutes. Here’s a link to a different post I did about how to do it. http://robergtaxsolutions.com/2010/11/how-to-get-an-ein-number-for-your-business-for-free/
There are people who have owned their businesses for several years and never had to get an EIN before. It hasn’t been an issue. But now, with all this “reporting” going on, I recommend getting an EIN for your own protection. Make sure you have access to a printer when you do it because you’re going to want to print out the form–or at least write down the number.
When I say it will take you less than 10 minutes, I’m not exaggerating. It’s an interview style format, you just answer the questions and it will guide you to the right sections. It’s not open 24 hours a day so be sure to check the times at the website. Good luck.
Ive never had to give one before so im confused? i tried filling out the W9 and it said it was to open a business
Ok i have a body shop and a lady came to get an estimate i gave her an estimate on how much everything is going to be and she faxed it to her insurance. Her insurance called me saying they need a W9 Form faxed to them and they will make the payment to me so i can start working. Someone please help. Thank you.
The senate repealed the 1099 provision of the health care bill. I’m guessing we’re all off the hook for now. I will post any updates if they come up. Here’s a link to Senator McCaskill’s website about it: http://www.mccaskill.senate.gov/?p=press_release&id=1181
Update on 1099s, I belong to an organization called the National Association of Enrolled Agents. They recently issued a letter to Dave Champ, Chairman and Sander Levin, Ranking Member of the House Ways and Means Committe regarding the 1099 issue for small businesses and for landlords. The NAEA take is that the requirements are too burdensome for taxpayers. Hopefully Congress will agree.
http://www.naea.org/MemberPortal/Advocacy/Comments/Camp_Levin_Letter_01252011.htm
Chris,
I hadn’t even thought of home office deductions but you make a really good point. The whole thing is mind boggling. I do expect the 1099 rules to be relaxed a little bit, if not completely, with this session of Congress. Even president Obama mentioned relaxing the 1099 rules in his State of the Union Address so hopefully things will get straightened out.
I find your point about credit card fees to be pretty interesting as well, especially form the standpoint that I am a small business service provider. I was thinking about getting rid of my credit card company as most of my clients pay by check anyway, but I think more business clients will use credit cards to pay me just to avoid having to write a 1099 for me. Ouch, just thinking about the cost is bugging me.
Thanks for your thoughtful input. I will make a new post if I get any definite information about home office deductions and 1099s. For right now, I would guess that we’re okay with those for now until we hear a definitive statement from the IRS that says we have to issue 1099s for that too.
How will the 1099 rule work next year with respect to the home office type of deductions. In other words, will someone be issuing a 1099 to their mortgage company if they take a portion of their mortgage interest as a home office deduction? Most people don’t pay this via credit card but by check or on-line. That also doesn’t account for all the other deductions a home office worker will use – electricity, etc.
What I find someone ironic is all of this, if the rules stay the same, is that it will drive more business to pay via credit card which will do a couple of things
1) lessen the ability of vendors to negotiate on costs
2) line credit card companies pockets in light of the recent Congressional action that was put in place to limit credit card fees and costs. Congress giveth and Cognress taketh away. In fact, small business will likely subsidize consumer purchases.
Barry,
One more thing that came to mind: When you do receive your 1099 from this tenant, make sure that the income you received from him is listed in box 1 for rents and not box 7-non-employee compensation. The IRS expects you to pay self employment tax on box 7 income, but you don’t pay self-employment on your rental income. I’ve seen a few folks get 1099s that were coded wrong.
You’re absolutely right about identity theft. You need to protect yourself. Yes, you can get an EIN as an individual. You will go into the IRS website and you’ll choose “sole proprietor” as your category. For EIN purposes, a “sole proprietor” is anyone who files a C, E, or F schedule with their tax return. Because you have a rental property, you’ll be filing a schedule E.
Currently, there is no place on the schedule E for an EIN number. I suspect that because of these new tax rules, that will change. But your EIN number will be tied to your social security number and the IRS will be able to track your income.
I tell everyone who has to issue 1099’s or W2s to use an EIN number. And quite frankly, with the new rules regarding 1099s, I’m recommending anyone who has to fill out a W9 to get an EIN number too.
Don’t lose your EIN number. Make sure that you print out your EIN confirmation letter and keep it someplace safe. You’re going to be using it again I’m sure.
thanks for the answer, but can I get a EIN as an individual not a business? I have a trust and can deed the free and clear property this year into the trust (pay the 250 to deed both of the condo’s for the recording fees to the town hall) but that may not help me this year…again I dont want to give this person my SS, idenity theft is at an all time high and by giving a person your ss number along with your signature…well in laymans terms they can destory your credit by selling this info to someone who is a user of personal information…
Hi Barry, Thanks for your question.
Technically, small businesses are not going to have to require W-9s and issue 1099s in 2011 for companies. That was an issue that Congress did a flip flop on. Small businesses got out of it, landlords didn’t. That said, many businesses are gearing up and preparing for having to issue 1099s anyway. One of my clients forwarded me a memo from his company (a major US corporation) saying that they wanted W9s from all vendors this year. So even though many businesses won’t be required to issue 1099s for 2011, I think they’re planning on doing it anyway.
One thing that’s confusing in your case is because you’re an individual. A company is supposed to issue 1099s to individuals if they’ve been paid over $600. I’m thinking that you probably should just complete the W9 and expect to receive a 1099 from the tenant for 2010. Usually, we’re talking about 1099s for services, but many companies do issue 1099s to their landlord also.
The accountant and the tenant are covering their behinds and you can’t blame them. If the IRS decides that they should have sent you a 1099, the fine is $100 to the IRS plus $100 to you.
One thing to remember when you’re reporting your income: Let’s say that for the year you received $1,000 in rental income. (I like easy numbers.) And your tenant gives you a 1099 for his rent, that amounts to $100. When you report your income, you’ll still only report $1,000 but you’ll have a line for income reported on 1099s and another for income not reported on 1099s. You’ll want to make it easy for the IRS to link the 1099s you received to the income on your tax statement, but you don’t want to forget to reduce your “non-1099” income by what’s listed on the 1099s. You don’t want to accidentally overreport your income.
Bottom line: sign the W9. If you don’t have an EIN number, you should get one so that you’re not giving out your social security number. I have instructions on my website: http://robergtaxsolutions.com/2010/11/how-to-get-an-ein-number-for-your-business-for-free/ It only takes about 5 minutes to do. I just had a client do it last week and she hates doing tax things and even she said it was easy. Good luck.
i am a individual who owns a commercial rental property, my tenant (a business) informed me today that his accountant told him that i need to provide him with a w-9 for the 2010 tax year. is this correct?
Jack,
No. You won’t have to provide a 1099 to Verizon for your home cable TV service. (Please, don’t give the IRS any ideas!) That’s actually a very good question though. But no, you won’t have to issue 1099s for your personal services right now nor in the near future. Also, because Verizon is a corporation, even if you were providing cable to your tenants then you wouldn’t have to provide Verizon with a 1099 at this time. I suspect that this might be changing in the future, but for 2011 you wouldn’t have to.
For a sole-proprietor, who files a single tax return, does this apply to personal-use services? For example, will I need to provide & file a 1099 to Verizon for my home cable TV service? Or, would it only apply to those services expenses against my business income?
I just took an IRS update class and the latest is that you don’t have to issue a 1099 to a corporation for 2011 and you won’t have to issue a 1099 for products–only services. Also, credit cards and PayPal will be required to issue forms for their transactions, therefore, you won’t have to issue a 1099 for services that you paid for with a credit card or PayPal.