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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Hey Scott,
sorry it took so long to get back to you. It’s a little busy in the tax office lately. (Some crazy thing about filing income taxes.)
Anyway Scott, your corporation is not a hobby, your corporation is a business and does have to issue a 1099.
Hey Shawna,
Technically, this year you do not need to give your landlord a 1099. But so many small businesses are so scared about not issuing 1099s–we’ve got 1099 mania.
As I see it, you’re going to report the income anyway so why not let them issue you a 1099? It keeps your tenant’s accountant happy. Make sure the 1099 says RENT and not MISC INCOME.
Do not give them your social security number. If they want a W9 from you, be sure to use an EIN number. If you don’t have one, you can get one from the IRS website: http://www.irs.gov/businesses/small/article/0,,id=97860,00.html
Hi,
I had a commercial office that I sublet last year. I was just asked my information so my subleter could send me a 1099. Does she need to provide that to me, or the management company that I would send the rent checks to?
This is a follow-up to Message no. 88 where I forgot to mention one thing about my hobby of building the Model T Ford.
For liability purposes, I set up a Corporation to hold ownership to the car, and the costs for building the car will be added to basis to offset the capital gains when my corporation sells it in a few years..
So my Corporate tax return has 0 income and 0 deductions, since it does absolutely no business and only owns the car.
Does my Corporation that does no business and only holds ownership of the car have to issue a 1099 to the guy that was paid to do work on the engine?
thanks so much!! i do have one more question. in the above post (Deb’s) you said you were working with a guy who had a 1099 that never got sent to the IRS and all of his income is now being examined. do you mean they company didn’t follow through, or the person didn’t follow through? i spoke with the 2 companies that we did not receive 1099’s from and one is sending, the other made one for my husband today and he brought it home. if the company who gave us the 1099 today doesn’t file it with the irs, who will be in trouble here? i don’t want to give the irs any reason to look at us, that would be so nerve wracking!! now i am wondering if i should even submit it…maybe just go from my own records…the total on the 1099 does match my records. what do you think?? since they said they weren’t planning on reporting it, do i just trust that they will since they gave us a 1099? confusing!!!!
@Kim,
So a business paid your husband $12,000. That generally requires a 1099. Now you have to report the income anyway, but if they paid you by check or cash, they should issue you a 1099. If they paid you by credit card, then they are not required to issue a 1099. (Because the credit card companies issue 1099s, although they didn’t have to this year.)
Bottom line, you report the income. If they get in trouble to not sending you the form–that’s their problem not yours.
Hi Kim,
right now, private citizens do not have to issue 1099s to businesses that do work for them. It would be different if he did the work for a small business, but private citizens, no.
Hi Scott,
I agree with you 100 percent! I also think you’ve got a really cool hobby. Private persons do not issue 1099s for work done.
Hi Scott,
I agree with you 100%. And I think you’ve got a really cool hobby!
Hey Debi,
Sorry while I sit here and scratch my head for awhile. Mostly I hear complaints about people receiving 1099s who thought they shouldn’t get one.
Okay, so you have a W9 from your landlord. You use that information to prepare a 1099 for her. Put your rent into box 1 for rents. Make sure you get the red forms to send to the IRS, but you give her a regular black copy.
Keep the W9 with your paperwork for at leat 3 years. If you give her a 1099, be sure to file it with the IRS. Please be sure to send it to the IRS. I’m working on an audit right now for a guy with a 1099 that never got sent to the IRS and all of his income is now being examined. Don’t just “make one up” follow through with the filing. Thanks.
I also would like to know if a company is required to give a 1099. We have done over 12K business with a company and the company rep said they are not reporting what they have paid to us, they will not be sending a 1099, and that we should use our own records for our taxes. Does this seem legit to you?
My husband and I own an auto detail business. He goes to the customer’s home and details their vehicle. Will his regular customers have to provide him with a 1099 for the service he is providing? We live in Illinois and over the course of a year some of his customers might spend 3-4K on his services.
I have a hobby which is building a Model T Ford.
I plan on selling the car in a few years and take its sale as a Capital Gain.
So I am definitely NOT in the business of building cars, as I only work on it in my spare time.
I paid a guy some money to do some specialized work on the engine.
To me, the amount I paid the guy is part of the costs I am putting into the car and will be part of my basis when I sell it.
So since I am NOT in a Trade of Business, do I have to report the payment to this guy on a 1099 misc?
I read the 1099 misc rules and it said I had to be in a Trade of Business.
What do you think?
I am a very small doll clothes and alterations business. Have sold at craft shows and on some internet auction sites for several years. For the tax year 2011, in addition to craft shows and internet sales, I rented space in a salon (thus “branching out” to a store-front of sorts). I just received a call from the salon owner that she did not receive my 1099 for rent paid for the year and she wanted to know what I was claiming. This was new to me as I had not started my tax prep forms yet. From what I’ve read so far, it appears that I do not have to provide a 1099 for 2011 to the receiver of my rental space but that she needs to claim the income. I am, however, planning to fill out a 1099 and give to her for my own benefit and records. Do I also need to do something with the W9?
Thank you so much for offering this assistance.
Hi Rocky,
First, a W9 is a Request for Taxpayer Indentification and Number and Certification. Here’s a link to the IRS website to look at one: http://www.irs.gov/pub/irs-pdf/fw9.pdf
For this year, I would not worry about issuing a 1099 form to either the corporation or the trust. Next year, I’m thinking you probably will have to so have your father sign the W9 using the trust EIN number (but only if you have a business renting from the property. If you’re renting as an individual, no–you don’t have to.
It’s basically a way for the IRS to make sure that everybody who receives income is reporting it. And Congress is fighting about it all the time so who knows what will actually happen. But right now, don’t worry for 2011 and plan on issuing forms for 2012.
I attempted to start a business in the state of CA in August 2011 but decided not to go forward with it. I had signed a lease with an individual that files taxes through her corporation. I paid her a total of $900.00. Do I give her a 1099 since I will be showing this as an expense? If so, it is past the deadline to send her one so what do I need to do? And, what is a W-9 that I have been seeing in many of your replies? I’m asking because my Father handles an Irrevocable trust which consists of 4 rental properties. I am renting one of these properties and want to know if I was also suppose to give him “the trust” a tax form? Once again, if so which tax form?
Hi James,
Welcome to the 1099 craziness. First, you never got a 1099 from a tenant before because tenants never had to give them. But with the changes in the 1099 rules,and then changing them back–well, everything is up for grabs.
Personally, I don’t believe that your tenant has to give you a 1099 for your rent. But his accountant might believe it and that’s not going to change anything. Businesses are supposed to issue 1099s to any individual that they pay over $600 to. Since you own your commercial property as an individual–that’s where your tenant is coming from.
He’s covering his behind. You’re going to report the income anyway so go ahead and give him the W9. (If you don’t use an EIN for your rentals–I’d get one. Don’t give out your social security number. http://robergtaxsolutions.com/2010/11/how-to-get-an-ein-number-for-your-business-for-free/
I’d bet that next year all three of your tenants will be issuing you a 1099.
One important thing: make sure that when you get the 1099, that your rent income is marked in box 1 and not box 7. Box one is for rental income, box 7 is for self employment income–you don’t want that for your rentals (I’ve seen lots of mistakes with that.)
I have been a self employed sole proprietor in a small manufacturing business for 42 years. Over the past 20 years I also have acquired and personally manage 3 separate small commercial rental properties and filed my 1040 Sch E every year. I have never had a tenant request a W-9 or attempt to issue a 1099 to me for their rent payments….. until yesterday. So I’m scrambling to find out what the law is for tax year 2011 and of course wondering what had happened in past years and what the future holds. Please comment on whether my tenant is required to issue the 1099. My other 2 tenants have not said anything. I’ve learned to keep quiet and be extremely resistant to paperwork throughout my life. Thank you
Hey Chris,
Sounds like fun to me! (I really am a geek.)
Your Dad needs to give your brother-in-law a 1098 mortgage interest statement. Here’s a link to the IRS website: http://www.irs.gov/pub/irs-pdf/f1098.pdf but you can’t just print it out, you need the special form. The IRS will give you forms for free.
Your brother-in-law does not have to give a 1099 to his tenants.
If you decide to bail on doing the return, send your brother-in-law to me. It might be helpful to have a professional get the first one started, then you can use it as a guideline when filing future returns. I handle all states and I’ve got a secure file upload to protect his personal information. (I gotta self promote sometimes.)
Hi Kailey,
This post will be the most helpful to you: http://robergtaxsolutions.com/2010/11/small-business-basics/
Bottom line, you report a 1099MISC on a schedule C and you’re going to be responsible for self employment tax. (A schedule C is part of a 1040 tax form.) Read the post, I’ve got a lot of information there.
Hi Patrick,
I think I was talking to your property manager earlier this afternoon–same question from the other side. (Not really, I was talking to a Missouri guy.)
Anyway, the way I’m calling it is: the property manager is giving you money. He’s the one that needs to back up the expense to the IRS.
For example: Lets say he rents out your house for $100 a month. He keeps $9 for his fee and he sends you $91. Sometimes he might keep a little more to pay some expenses, but basically he’s paying you money.
Now it’s kind of funky because technically you’re the one who’s paying the manager the $9, but the IRS is going to see all that rent money going into the manager’s bank account. So I would have the manager prepare a 1099 to you instead of the other way around.
If you do not receive a 1099– you will still report the rental income that you did receive, even if you don’t receive a 1099. (Which is what you would have done anyway.)
PS, I entered my email incorrectly on my first comment. Sorry! It has been corrected here
Oh my! I offered to help my brother-in-law with his tax returns this year because he has to file Schedule E for the first time but I think I may be way out of league. He bought the family homestead after Mom died and decided to rent it out as a single family residence. Dad is holding the mortgage and receives monthly payments for the purchase of his home. Does my brother-in-law need to file a 1099 for the rent he gets from his tenants. Does Dad have to file a 1099 for the loan payments he gets from my brother-in-law? This is very confusing!
i am working for a company and we are recieveing 1099’s and i have no clue how or where to file them.. can you please help!
I rented out my NH house in September of 2011. I moved to my house in Florida. I have a property manager in NH that takes 9% of the rent for his charge. Every month he deposits the remainder in my account and sends me a profit/expense form. Do I need to send him a 1099-MISC form since I am essentially paying him (I believe it is over 600 for the year, plus some other charges like moving and storing my furniture). Or is it up to him to send me this form? What is the deadline for him to send it and what if I don’t end up getting one?
Thank you! Now I only have to deal with one farmer who is insisting that he have my husbands SS even though I have given him a W9 with EIN.
Hey Brandi,
I’m going to send you over to a different post about 1099k forms. I think that will handle your question: http://robergtaxsolutions.com/2012/01/1099k-%e2%80%93-what-to-do-with-it/
I received a 1099 from google checkout who I use for my business. The amount on the 1099 is the amount that was processed but not actually my pay. How do I do my taxes with this?
Hi Valerie,
I would issue 1099s for all independent contractors who did work for over $600 in 2011.
Thanks for this great site. Let me just clarify one more time re: landlords. I owe 4 rental properties. I need to file a 1099 for all independent contractors who did work over $600 on those properties in 2011. Correct? Thank you!
Hey Mattia,
That’s a really good question. Technically, yes you should. On the other hand, you do it to prove your contract labor deduction on your taxes–so why bother? On the other hand–you may wish to write off the expense later?
The official, technical answer would be to issue 1099s, and then use those costs as “start up expenses” that you had in 2011.
Hey Caroline,
It’s sort of is a party isn’t it? A party of confusion! And I see why you’re confused. And everybody else for that matter. But–the law about landlords issuing 1099s was repealed. Now, I’m going to copy this from my “The Tax Book”–“…no Form 1099MISC is required if the taxpayer is engaged in a rental real estate activity and isn’t otherwise considered to be engaged in a trade or business activity.”
I’m going to copy this also from “The Tax Book” — The rules that require information return reporting for payments of $600 or more to non-employees (independent contractors) still applies.”
So–the way I’m reading it is that–all the other %#*&$ stuff that you were supposed to have to do under the new law–you don’t. But you should really be doing a 1099 MISC to a contractor that did independent work for you. So I would issue your guy a 1099 MISC even though you’re a landlord.
If I’m wrong–no harm no foul. Your guy is supposed to claim that income whether he gets a 1099 form or not. Plus, your behind is covered if you file it. Sorry I don’t have a better answer for you.
Hi Tara,
Yep, it’s crazy. And just do the W9s. I’ve got a corporate client who gets multiple 1099s every year. Everybody is just trying to cover their behinds.
About the 1099 for your rent–no-do not issue a 1099 for the rent paid. You must report the income as the landlord, but you do not issue a 1099. Hope that helps.
Hi, I seem to be a little late for the party, but it would be great if you could answer my question. I actually just want to verify that I got it right. We are landlords (husband and I) and had a maintenance person for the house we rent out for the first time last year. We paid him a total of $750 for his services. I did the chat with turbo tax and also had someone there on the phone. The phone person said, I don’t have to issue a 1099-Misc bc the law was repealed in April 2011, the chat person said I do have to. If I understand right what you said in earlier post, the repeal did not cover landlords, correct? So I do have to issue a 1099-Misc. Sorry if this seems redundant and I appreciate your input!
Hi, I have a sticky with 1099s. My husband has a large animal veterinary practice that is operated as a PLLC. I am one of his employees. The clinic is located on the same property as our residence but since it is in an independent space we have not taken a home office deduction but instead we have charged the clinic rent. Do I need to file a 1099 for my husbands PLLC paying us rent? Also the farms we work for are driving me bazonkers calling for the EIN and think I’m mental when I explain that he is a corporation. Is there any hope that the IRS will publish a clear and up to date summary?
Hi there. Last year I paid a graphic designer to do some logo work for me on a couple of projects that I was thinking of starting businesses for. None of them panned out, so I’m wondering if I still need to issue him a 1099 since the fees were over $600. I’m not deducting the payments on my taxes and did not set up any business entities. However, that could change in the future as I might still set up a company around one of the brands, but again, have not as of yet. Thanks!
The law requiring landlords to issue Forms 1099 MISC to service providers has been repealed. As long as the landlord is not engaged in any other kind of trade or business, then she doesn’t have to issue you a 1099.
I am a resident manager and my property manager is wanting to file a 1099 on me. Can she do this even tho my compensation is free rent. There are no invoices of payment becuase I dont recieve cash.
Hey Suzie,
I’m going to say yes. Err on the side of caution. You say the lease is between two individuals–so I say yes-W9. You also say it’s paid through a corporation–is the corporation writing the check? Then get a W9. Is a corporation receiving a check? Go ahead and get a W9 anyway. That way you’ve got it. You may not need to file a 1099 next year, but it’s much easier to get the W9 before you give someone money than it is to get the information on January 30th of next year when the documents are due the next day.
If a commercial lease is between 2 individuals & the rent check is being paid through a corporation, is a Form W9 necessary?
Hi Sara,
I’m confused too. Usually the tenant gives the landlord a deposit, not the other way around. But I’m guessing that you moved out and that your landlord refunded your deposit. You shouldn’t get a 1099 for that. Your deposit refund is not an expense to your landlord and it is not income to you. Unless there’s more to this story–you should not get a 1099 misc from your landlord.
You need to call him and figure out what’s going on. Bottom line–your rent deposit is not taxable income to you and there should be NO 1099!
Hi Thank you for your help.
I am confused I rented from my landlord and he had to give me (as the tenant) a 1500.00 deposit. He has sent me a 1099-MISC form back. What does this mean for me on my taxes???
Hi Anita,
No, you’re backwards. You will have to file 1099 forms for tax year 2012 filing in 2013 but not for tax year 2011 filing in 2012.
I don’t mean that you’re backwards, just that you got the rule backwards. The rules are pretty confusing. And–they could change again! But make the assumption that you will be filing 1099s for stuff next year.
I understand the law was repealed for landlords having to file 1099 forms for property expenses for 2012 tax year (filing in 2013). However, from what I’ve read, this is required for the 2011 tax year (filing in 2012). Do I have this right?
This is for Tom with the Condo Association–
That’s a really good question. First–you’re a condo owner–so how is it you’re paying rent? That threw me off. I used to be in real estate long before I was preparing taxes and there are some very specific rules about rent reduction and wage income–what’s taxable and what isn’t.
Given that you’re only getting a $1200 rent reduction–that’s probably in the taxable category (it looks like $100 a month–so that’s not very big so I’m guess the work you do is not what would be considered a full time job.)
So, I guess, being technical, the condo association should give you a 1099 for the $1200. I would put it on a 1099B in box 14 for Barter because you didn’t really get cash, you got a rent reduction.
I would say that you are not in the business of being the resident manager, is that a fair assessment of the situation? You’re just the guy who got voted on to be the contact person for the condo association when things needed fixing. I don’t think you should have to pay self employment tax on that money. If you get a 1099 MISC, the $1200 should not be self employment income (unless that’s really what you do for a living.) The $1200 should be listed in box 3, which is other income.
Hi Matt,
I had my answer for you and then I decided to call the IRS, just to double check-because I was kind of shooting from the hip and I wanted to be sure. Well–the IRS gave me a completely different answer than what I was going to tell you–but then the person said, “You know, 1099s aren’t my department let me give you their number.” Okay–when I called the IRS, I specifically said that I had a 1099 question but–okay complaining doesn’t help.
Anyway–the official phone number for 1099 questions is (866) 455-7438. The line is open from Monday through Friday 8:30 am to 4:30 pm Eastern Standard Time.
Normally I would just get this answer myself and post it for you but you’ve got a deadline of Tuesday and I might not get through to the IRS by then. (For example, I called before 4pm–but since I was on hold for 45 minutes I guess they just forwarded their calls to the W2 department.)
Anyway–my shoot from the hip answer was no. The IRS lady (in the W2 department) said yes you do. I was having trouble finding documentation to back up my answer (or hers) which is why I made the phone call in the first place.
My logic was–you never had to before, and the 1099 rules basically went back to the way they used to be (with a few exceptions but your landlord wasn’t one of them.) The IRS lady (who specifically said she wasn’t up on 1099 rules) said yes you do have to because your landlord isn’t a corporation.
If I get a definitive answer, I’ll post it. If you get one, please post it–lot’s of people want to know. The way I’m going right now is–when in doubt, issue a 1099. If the IRS gets more paperwork than they can deal with–it’s their problem for not making this issue clear. I get a little cranky when I can’t get a decent answer. Just remember I’m not cranky at you, you asked a good question.
What happens when a condo owner gets a reduction in rent because he is the resident manager which amounts to $1200/year. Should the condo association give him a 1099???
thanks
Hi Jan,
I am paying office rent to an LLC, do I need to issue them a 1099 for 2011?
Also, I occaisonally use their printers, and they bill me for that as well. For 2011, the total printing amount paid was just about $500. Do I need to add the rent (about $8,000) and the printing costs together, or do I put them in seperate boxes, or do I exclude the printing costs?
Hi Becky,
Good question. My gut reaction when you say “manufacturer” is that you’re a corporation and that no, you don’t need a 1099. But I’m finding that lots of small businesses are issuing 1099s to cover their butts with the IRS and I can’t blame them. I was just on the phone with the IRS last week about someone else’s 1099 issue and the IRS woman informed me that I should be handing out a W9 to all of my business clients that I’m preparing returns for so that they can issue me a 1099 in 2012. (So it looks like I’m going to be preparing 1099s to give to myself–weird.)
Anyway, 1099s are definitely in all of our futures whether we like it or not.
If you are a cabinet component manufacturer, should you receive a 1099 for products sold to builders. For instance we build cabinet doors and sell them to a builder. Should this builder send us a 1099 for our business?