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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If I provide an easement to a cable company to have access to a cable pole and/or a cable hub building, and they give me free services in exchange for it… Do I have to fill out a 1099 for those services if the FMV exceeds $600? They are threatening to turn off my services if I don’t provide them with my tax id.
Hi,
It is me again and I have a few more questions as well as explanations. My stepfather owns the property management company, and he plans on leaving it to me in a will or selling and leaving me the proceeds. I have also considered opening my own online company, and have gotten all the tax sales licenses needed as well as company license (it will be a sole proprietor). However, my step dad tells me to have it titled a LLC, and if anything should happen to the company, it does not affect me personally.
My step dad has no children, and my mom has passed away…he’s an only child. Therefore, he will be leaving me most of his estate when he passes away assuming he passes away prior to me. He promised my mom he would help me any way he could once she passed away, but I hate what he does for a living. It has been very, very good to him. Although I hate what he does…I have learned a lot about managing my own rental property.
There is one more question he bought two houses and when purchasing the houses put my name on them as a co-owner. One of the houses there is no debt, and the second house I live in with a small mortgage of $145k. If I explain this to the IRS when asking for a payment in compromise and tell them, we have an agreement for him (my stepdad) to receive all the income from these properties. Until he passes away or I should pass away…will they still consider me for an offer of payment in compromise? My real income is only about $30k a year, and I pay all my own medical expenses ( medicine, doctor’s visits, health insurance premium etc.) + car payment + student loan payment + the payment mentioned in my previous email to the IRS for back taxes owed of almost $200 a month.
I hope that this makes sense and I have written in a way you can understand my questions. Oh, I do need to let you know there is no income on the house with the small mortgage because it is my residence. However, my step dad makes the mortgage payments…we have owned both properties for over ten years. The first property was purchased in 1998 and he gets income from that one, and the one I live in was purchased in 2001.
My step dad told me it might be easier if we put both houses in an LLC therefore, we will actually only own the LLC and not the houses. He has bought almost all of his rental properties in LLC’s + he suggested I move into one of his properties (his property meaning one I have no ownership interest). Would this work better for me if I were to apply for a payment in compromise?
Thanks in advance for your help…
Ben
Hi,
I found your website and am so glad. There is a question I have about 1099-misc income for 2011. Currently I work for a property management firm and am treated as an independent contractor. Therefore, I am responsible for all my taxes, insurance, etc. and I have worked on some property owned by the owner of this management company.
The owner told me he had to fill out a 1099-msic income form for the IRS for the year 2011 based on the income made from working on his properties. In the past he has never given me a 1099-misc form for work done on his properties. However, I have been receiving a 1099-misc form for years from the actual management company. My title in the management company is leasing agent, but I rarely ever work more than 30 hours a week. Therefore, I have free time to work on some of the owners properties for extra income.
I am requesting an extension on my taxes for the year 2011 in an effort to get a factual answer to my concern. The owner of the company has never issued me a 1099-misc income for work done on his properties. However, he has told me his CPA told him it’s now the law and he had to issue me one for 2011 ( for work done on the properties).
Is this true if it is true, I will be pushed up to another tax bracket, and do not have the money to pay my 2011 taxes now.
One more question I have also been making payments to the IRS for taxes owed from 2007 – 2010, and taxes owed for 2011 will be added in the payment plan.
I have seen commercial after commercial on television about law firms whom can help a person lower past due taxes and start fresh. Is this possible…do these companies really exist and can they really help a person.
It does no good to lie to you…I use all of the income made for ordinary living expenses. I did have a friend tell me I could start making quarterly payments to the IRS for taxes owed in the future. However, I pay the IRS almost $200 a month for past tax years and will be adding 2011 to the pile. It is as if I am in a hole and it continues getting deeper.
What do you suggest I do…?
Thanks in advance for your help,
Ben
Thank you for your help. Great advice, I don’t feel panicked now for what to do.
Thank you again.
Hi Karen,
Thanks for the comment about the quick responses. (I haven’t been to the web site in over three days–sorry, it’s my busy season.)
Okay–I would forget the 1099 to the landlord. (Accountant down the hall from the other company says 1099 the landlord–two opinions for the price of one.) I would definitely 1099 the landlord next year. If your landlord is a rental agent or corporation–no 1099 required at all.
You do not issue 1099s for loan repayments. You’re right about that.
Now for the commission–I’d issue a 1099–yes it’s late, yes there’s probably a fine–but I think it’s better to issue than not. (Besides you can probably get the late penalty abated since it will be a first time.)
Hey Jacob–
Rule number one here–you don’t get to call yourself stupid! Especially on this page–the whole 1099 thing is a mess this year.
Now the question about do you need to file 1099s and did you? So yes, you need to file 1099s and no–you’re not going to–yes, I’d amend. That’s a gotcha question if ever I’ve seen one. It’s like saying, “Gee, I’m supposed to do something but I’m not going to.” So that is kind of a set up for the IRS to come back at you.
Here’s what you do, file the amended return. In the explanation box say, “question 1 on Schedule E was answered incorrectly on original return. Revised schedule E attached. No change in final tax determination.”
Your amended return will have all the same numbers as the original, but your behind will be covered and you’ll sleep well at night. Do you have to? I don’t know for sure. But it’s the better safe than sorry thing.
Hi,
You have a great site with excellent and quick replies which is impossible to find.
My Question: I am self-employed. I had inventory from a prior business. I sold most of the inventory in 2011. I had originally borrowed money for cash flow from several business friends the year prior. (A different Business) The inventory value and My combined investment was 10 times what I was able to sell it for this last year. Anyway it was sold, I paid them back the money I borrowed, had a small amount that I kept, and am still paying rent for the storage space for the balance of inventory not yet sold. I see all this 1099 changes and everything going on. 1) for my 2011 taxes I didn’t have one for the landlord, is this OK this year? 2) The Loans paid back are not anything to do with Money out right? It was cash flow loaned to me with the old inventory, and when sold I just paid it back. 3) An I just saw that the sales commission was through me, thought the buyer had handled based on earlier agreement. So I need to file the 1099-Misc for that now and late. Will that be a problem for me?
I’ve got a thousand other questions, I guess I need a service.
Thank you for any help, Best regards.
Hi Jan,
First I like to say that this is a great site and thank you for taking the time to give the advice that you do. I have two questions that I am seeking an opinion. My situation is that I have already filed my federal return for 2011. I have several rental properties and fill out Schedule E. I realized, after filing, that I did not correctly answer the two new Schedule E questions about 1099 issuance. Specifically I stated that I did need to issue 1099s but that I had not done so, i.e. ‘yes’ to the first question and ‘no’ to the second. In all actuality, based on the 1099misc guidance, am not required to submit any 1099s for last year. I would not like to get into the depth of my stupidity that caused me to make this mistake, but it occurred none the less and I did not catch it until after the return was gone. My first question is should I file an amended return and correct this mistake? I know that amended returns are usually used for correcting information that has an impact on filing status, income, deductions, missing information, etc.. To my knowledge, the answer to these questions on Schedule E has no impact on the reporting or deductions on Schedule E. So again, can and should an amended return be used in my situation? My second question is regarding potential IRS reaction to the way I answered the questions. I know these questions are new to Schedule E this year but have been on Schedule C. If I do not amend the return and let it state that I should have filed 1099s but did not, based on the history of this question being asked on Schedule C, does this put me at higher risk of follow up from the IRS? Thank you in advance for any opinion or advice you can give in this situation.
Hey David,
You’re getting into a little more detail than I fell comfortable handling over the internet. Technically the improvements should be depreciated over 27.5 years–but the improvements to the land and fences–that’s 15.
Then there’s the issue of how to fix it–do you make an election to change the accounting method or do you go back and amend all those prior years?
Bottom line though–anything that can possibly qualify as an expense–you want to expense. So anything that’s a repair should be expensed. But a lot of the items that you mention do sound like they’re genuine improvements–so you’re going back to depreciating.
Also, make sure you break things out–like the the refrigerator because you can depreciate that faster.
I hate to tell you to go back and amend all those returns–but I’m thinking that that’s technically the correct answer. That said, if you were to ask the accountant down the hall from me–you’d probably get a different answer–so you might want to check to see if you get an answer you like better than mine. I feel like I’m giving you a correct answer–but this is one of those cases where there are more than one right answer and mine might not be the easiest option.
Hi Jan,
Thanks for your answer. I’ve been reading further on other websites and am a bit confused. Since the kitchen was remodeled, isn’t it an improvement, not a repair, and consequently it should be straight-line depreciated over 27.5 years? If so, which parts of the remodel need to be depreciated this way? Just the labor? It seems the range, refrigerator, and carpet can still be deducted; I’m not sure if the cabinets are deducted or depreciated. Please clarify! Also, if I depreciate over 27.5 years, do I still need to give the contractor a 1099 MISC?
A related question: Over the years my dad has added fences, a courtyard window, and siding to the property. He depreciated them and “chose” a recovery period of 10 years for each of them. It seems that they are all improvements and should have been depreciated over 27.5 years, correct? The siding and fences are halfway through their 10 year periods. Should I switch them over to 27.5 years or just keep going with the 10 years? The window was installed in 2010, but my dad forgot to take the first year’s depreciation; I suppose it will be easy to switch it to 27.5 years.
Thanks again.
Hi David,
You’re pretty good. The only thing I’d change is that you don’t need a schedule C–put the contract labor on the Schedule E, that’s where it belongs. (I think you don’t have a line item for that so stick it under repairs and maintenance.)
The difference between the 100% depreciation and the section 179 deduction is that the 179 deduction may be limited depending upon income, the 100% bonus depreciation will not be limited. For most people, it turns out the same.
And yes, to be completely compliant–you should break out the cost of the cabinets, but yes, the result will be the same.
Good job! I hope your Dad appreciates your help.
Thanks Wayne. About the 1099 to the dealers–I would issue one. What happens is it looks like all the income is yours because you’re the one making the deposit. The 1099 will cover your behind in the event of an audit. It’s good business practice.
Hey Jan,
One more detail. I also sell items that belong to me in my store. When I go to the bank to make a deposit I deposit the money from my sells and my dealers sells into one account. I then right them (the dealers) a company check at the first of the month from this account. Is this a problem? Would this require me to give my dealers a 1099?
Hi,
My dad has owned an apartment building for the last 35 years, but it seems he’s done his taxes concerning it incorrectly for all of those years (depreciating assets using the wrong recovery periods, not taking Section 179 or Special Depreciation Allowance deductions, depreciating the labor for remodels instead of deducting it, etc.). Last year (2011) he remodeled an apartment before re-renting it out; from what I’ve gathered from TurboTax and your very helpful page here, here’s how I think he should report this:
* He bought a refrigerator, a range, and some carpet. TurboTax used the 100% Special Depreciation Allowance to deduct all of the costs. It didn’t even give me a chance to select Section 179, but I assume the result is the same either way.
* He hired a contractor to install the refrigerator and range, paint the interior, and repair odds and ends. He should get an EIN for himself, have the contractor fill in a W9, and then issue him a 1099 MISC (since the contractor charged him more than $600). Even though the deadline to issue the 1099 MISC was 1/31, he should still do this, correct? He should also notify the IRS by 3/31 that he issued the 1099 MISC.
How does he deduct the contractor’s charges, by entering them on Schedule C, Line 11 (Contract Labor)? He’s never filled out a Schedule C before. I tried it out in TurboTax and found that Line 11 was essentially the only line filled out. Schedule C had other expense lines, but those expenses were entered on Schedule E. Is this correct?
Hmm, actually, the contractor’s charges include the cost of kitchen cabinets, which he didn’t list separately. To be completely compliant, we’ll have to ask him to break out the cost of the cabinets and use the Special Depreciation Allowance on them, correct, even though the end result will be the same?
Is there anything else that I should be doing on the return concerning the rental?
Thanks a lot!
Thank you sooo much for your help Jan! Great website and even better advise. Keep up the great work.
Hey Wayne,
What I would do have your landlord give you a W9 so that you can issue him a 1099 MISC for the rent you pay him in 2012. Since you’re paying him 12,000 a year–you should issue him a 1099.
For your tenants, you should give them a W9 so that they can issue you 1099s. Their 1099s should say the rent they pay you, (which is box 1), they should not be “non-employee compensation” which is box 7.
I know it seems like a pain in the behind, but that’s the way things are going and you’ll be protected by filing all the right paperwork.
Hey Jan,
I own and operate a antique mall (LLC) in Alabama and need some advise please. I rent the building from my landlord for $1000.00 a month. I pay by company check. What forms need to be issued here if anything? My delaers/vendors are people that sell things in my store. I rent them a space to sell their goods. I do not take a % of their sells. Just a flat monthly rate for them. They pay by check or cash. All they do is keep their booth stocked and I conduct the sells for them and pass along that money to them at the first of each month. (They perform NO work for me.) What forms need to be issued in this case, if any? Thanks for your help in advance Jan.
Hey Yolanda,
Have them do the W9s. If your managment firm receives payments from the title companies, then you should complete a W9 for them. The title company needs to show the IRS who they make their payments to.
It’s a legitimate request.
Our firm manages Condominium Associations. When asked for Estoppel Letters from title companies, we are being asked that the Condominium Association, which is a not-for-profit organization fill out a W9? Is this correct? We are confused since the monies being collected are fees/debt to be paid by the members of the community.
My firm manages Condominium Assocaitions. I have been asked my title companies to have the condominium association, which is a not-for-profit corporation fill out a W9. Is this correct? Should I be asking my associations to fill out W9’s?
Hey Ed,
I’m tired and I want to go to bed but I saw your post and decided that you needed an answer now. (Just wanted you to know that I think you’re important.)
Rest easy. Because you’re using paypal–Paypal issues 1099s. Anyone you pay through paypal is covered. You’re off the hook. Good night. (And you can get a good night’s rest too.)
Hello. please I have a question that has been eating me up for days now. I am currently a sole member LLC and I am operating an online marketplace. So that means that I operate as the middle man (Just taking comission for every transaction). I charge using Paypal, but the only issue is that I require my users to deposit funds upfront before each transaction as a means of avoiding fraud. So I act of some sort of escrow and these funds are help on my Paypal account untill the trasaction is successful. With this 1099 IRS requirement, am I required to issue 1099 form to every user that earns $600 and above? If will it include members of other nationalities.
Thanks Amber,
You’ve helped me too!
Hello. The irs website had links for places that you can prepare 1099/w2 forms and then file online, the first site I went to wouldn’t let me do it without an ein but the second one (google efile for business) let me do it with a blank ein, you can then print from your.comp to give to recipient and they efile it to the irs and correct state agency all for 3.49, they also have options for it to be mailed to the recipient. Very easy and cheap, hope this helps, you’ve been very helpful to me
Hi Amber–
No box one for rent is exactly right. My bad. The salon owner isn’t only a landlord, but what she’s getting from you is rent so that’s correct. Question though–where did you file a 1099 online? And how did you do it without the ein number? I think other folks would like that information. (I use my professional software, I don’t know about the online thing.) Thanks.
Hello, I started this business in september 2011, the owner is giving me a hard time, I filed the 1099 already online with her contact info and a blank ein because she would not provide out to me, even with a w9 request. I did however put it in box 1 for rent should I do a corrected 1099 online I think they dont send those for another couple of days also why does it not go in the rent box because shes not solely a landlord?
Hi Amber,
Technically, you should issue a 1099 to the owner of the salon for the full amount of the rent you paid to her. The figure should go in box 3 other income, not box 7, because you’re paying rent.
Now–it’s awfully late in the season. Have you ever done a 1099 for rent before? You see the forms were supposed to go out on January 31. Do you have all the information you need to do the 1099?
If it’s possible–I’d do the 1099. If you can’t I wouldn’t worry too much about it this year. You really will need to do it next year. So have the salon owner complete a W9 form for you. Get the information now, it’s so much easier now than later.
Hello, quick question, I am a nail technician, Independant contractor/sole proprietor. I pay a monthly booth rental to the owner of the salon, who also does hair. Do I need to issue a 1099 misc for rent I paid to her over $600 in a year.
Hi Joe,
I think everything is just fine there. Yes, you need to report the $3000 income, but I don’t think you’re self employed. I would agree that it should be counted as “other” income. You’re not in the business of managing the condo–it sounds more like you’re doing them a favor and they’re writing it out of their rent.
And yes, they have to report it on a 1099. They are required by law to show your full $500 a month rent in income–so they show the deduction as a payment to you–but as other income, not self employment. I think everything is perfect. (I had a similar case and they were charging the fellow’s rent reduction as self employment income–really messed him up.)
So you’re all good. Report te $3,000 on line 21 of your 1040–as other income.
@Sonnie–got the other message. Okay.
Hi Sonnie,
Here’s what I would do. (Me, Jan would do–not necesarrily the proper accounting advice.)
I would scrap giving her a 1099 for this year. 1. It’s already late and 2. So many people don’t know about the rule, I’d just go with the flow and forget it. I’m pretty sure there will be “forgiveness.”
But–for 2012, you really will need to issue a 1099. So here’s what you tell your landlord–you give her a W9 form to complete. Explain that because your accountant (and the IRS) requires that you submit 1099 forms for the rent you pay, she will have to complete the W9 form. AND–and this is the really important part–you won’t be able to pay her rent until she complies.
That’s what the big companies are doing–you have the right to do the same.
If you’re lucky, you’ll get her to sign the W9 in time to make your accountant happy.
i have a question that not even the IRS can help me with (at least by phone). i live in california. im a resident manager for a CONDO building that has 10 units. i live onsite and pay 250 (other 250 credited) rent for my managers apartment. i do not receive any wages from the association. i just clean, take care of the common areas and am around for appointments with contractors etc. the association issues me a 1099-misc with 3000 in the other income box 3. this is supposed to be them i guess reporting the rent credit. my agreement with them looks like a rental agreement and employee agreement. basically it says my rent is 500 but they will credit me 250 for my work. i think they also have workers comp insurance for me, im not sure. do i report this 3k on my 1040? i have been the last few years. ive never paid SE taxes on it.
I am an antique dealer with a retail booth space in a antique mall. In 2011, I paid the mall owner over $600 for my space and plan to continue to be there thru 2012. This is my only retail outlet. There are 24 other dealers in this mall and we all pay various amounts according to the number of square feet of floor space in our booths. My CPA advised me that I need to send the mall owner a 1099Misc for the rent paid in 2011 and will need to send her one for 2012 before January 31st of next year. I contacted the mall owner and requested her business ID# so that I can send her the 1099s. She refused to give me any information and said she has not be told by her tax advisor that she needs to give this information to any of the mall dealers. How do I handle this.
Hi Suzi–
Okay, technically your accountant is correct, but who even knew about that before this year? Nobody!
So here’s the thing–I wouldn’t even bother worrying about prior years. Just let it go. For this year–okay, you should give your landlord a 1099–but you haven’t done it for 4 years. I would definitely do it for next year–give the couple a W9 form and explain that you’re going to have to report the income next year.
Are they really just a couple who own a commercial building or do they have a corporation set up? If they have a corporation set up, then you don’t need to issue a 1099. You also don’t need a 1099 for credit card payments. (Just in case.)
Yes, you’ve missed the 1099 deadline–I’m guessing that the old couple isn’t going to complain and turn you in. You still can electronically file 1099s with the IRS so you haven’t missed that deadline. I mean, if your accountant is adamant–well then do the 1099–he is technically correct. (If you read the 1099 instructions, yes you should issue a 1099.)
But, for so many years, so many people haven’t even realized that this was even an issue–I’m not concerned with you being hurt in an audit over this.
I know my answer sounds wishy washy–sorry about that. Your accountant is right–a 1099 should be issued, I’m just saying that if I were you I wouldn’t lose any sleep over this.
Hey Paola,
Please tell your boyfriend that he is not alone. I’m working on a similar case for a client in my office. What do you do with a 1099 for $100,000 when the client only made $80,000? Or whatever the numbers are.
Here’s how I would do your boyfriend’s return:
First–he really does have to list each 1099 form–the IRS looks for that in their computers. So all his 1099 income will go on line 1 (along with any other income.)
Next, on line 2(I’m guessing that he’s a Schedule C kind of business) where it says “returns and allowances and any other adjustments” I’d put the money that went to the homeowner and not him. That way the rebates will be subtracted from his income.
Make sure he documents all those rebates and everything, but I think it’s legit for him to deduct money that he has never received. At least that’s the way we’re doing it in my office.
Hi Jim–
I’m going to tackle your last question first–does this apply to 2011 and beyond? I’m thinking yes–but Congress can come in any minute and change things so I don’t count on anything.
That said–generally a 1099 is issued for making payments to a person that amount to over $600. So, if you pay your gardener $60 a month, then technically you would issue a 1099 for $720 for the year.
Now–that said, if your gardener has a company like “Joe’s Gardening, Inc.” well then, for now anyway you wouldn’t have to issue a 1099. Or if you paid Joe by credit card.
Now here’s the thing that kind of has me confused—if you look at the Schedule C–that’s the form that small business owners have to fill out–they’ve added a new line that says, “Did you make any payments in 2011 that would required you to file form 1099? http://www.irs.gov/pub/irs-pdf/f1040sc.pdf It’s on line i.
Now, if you look at the Schedule E–that’s the form Landlords fill out–that line’s not there. Now I’m told that you should still complete the 1099s–but you don’t have the question on your form. Maybe it will be there next year, but I’m finding it interesting that it’s missing this year.
Personally, I’d err on the side of doing 1099s. But if you’re having trouble getting the information you need to complete them — I’d use that as a good excuse for not getting them done–the form doesn’t say it’s required.
I would definitely assume that the 1099 issue will with with us forever. Think in terms of politics. We currently have a deficit problem with the federal budget. The IRS estimates that there is millions of dollars of unpaid income tax due to people not reporting their self-employment income. They believe that the 1099 reporting will solve much of that problem. I think (opinion, not fact) I think that the 1099 reporting is how the government intends to increase tax revenues without actually raising the income tax rates.
I am so confused. I am the bookkeeper for a small LLC company. We currently pay rent to a couple for the commercial building we do business out of. I took all my tax information to the accountant yesterday and he told me I should have sent my landlord a 1099. Actually he said I should have been sending them one every year (we have been there for 4 years). I had no idea that I was supposed to be sending them a 1099. I thought 1099s were for people who were service providers. What can I do now that it is past the February filing deadline? What about all the past years rent? Any suggestions you can give are much appreciated. Thanks!
i need help. my boyfriend did some work for people whos house flooded, he was asked by the insurance company to fill out and affidavit with his info and the amount he charged so they could file a 1099. the insurance company sent a check on the homeowner and my bf name for more than what my bf charged. when asked insurance company said that was normal and that he should sign the check and he would get the correct amount from the homeowner and that he would only get a 1099 for the amount his affidavit showed this was in december. then in january they sent another check to the homeowner for an even bigger amount gain on both their names and again the insurance company said to sign it that thtas how the checks get cut with the homeoners name and the name of the last contractor and again that this wouldnt affect him.
in january he received a 1099 for the amount of the check, since then him and the homeowner have been trying to get the insurance company to send him a revised 1099 and they keep saying they are working on it but they have also said he shouldnt have not signed the check even thou they have also aknowledged that they said it was ok for him to sign and that this wouldnt affect hos 1099. they claim the department that handles the issuance of the 1099 will not corrrect it. so this probably means he will get another 1099 for the other bigger check next year, and on this one he didnt even get a dime.
both checks were deposited by the homeowner in their own bank account not my boyfriends account…… so what can he do now? pls help
First of all I would like to thank you for your effort in keeping the misinformed up to date on the recent rulings regarding various rental property reporting requirement issues to the IRS . In reviewing all previous questions and answers I still seem to be uncertain as to what I should do. I am an owner and manager of a 4 unit apartment. I have made payments in 2011 to both private parties and general contractors for painters, gardners, plumbers, electricians,etc. Over the year, I have had individual expenses that amounted to over $600 and some that collectively added up to over $600. So under which circumstances do I issue 1099 MISC or any other document if any at all? Is the $600 threshold for small jobs such as gardening that run $60 a month but $720 for the year as well as individual jobs such as painting the interior of an apartment for $1000? And lastly, does this ruling apply to 2011 and beyond? And once again thank you. Your responses are greatly appreciated.
@Tracey–
Keep doing what you’re doing. You are an LLC and you should never give out your social security number. You’re fine. 🙂
Hi Dave,
Technically the company needs to issue you a 1099 because they paid you over $600. The rules changed back and forth so many times that we’re all a little befuddled. Quite frankly–I don’t think they really need to issue a 1099 for rent–but so many accountants are demanding it I don’t consider it to be an unreasonable request.
You do not issue a 1099, you only complete a W9 form. That gives them the information they need to issue you a 1099. You would have reported your rental income on your tax return anyway so it’s not like it’s harming you in any way. One thing though–don’t give them your social security number. Get an EIN number for your rental property (it’s free and it takes about 5 minutes.) Let them use the EIN number instead. Here’s more information: http://robergtaxsolutions.com/2010/11/how-to-get-an-ein-number-for-your-business-for-free/
Hey Zeena,
That’s an excellent question! I would say no. Aunt Bertha is a private citizen selling a item–she’s not doing work for you. So the 1099 would not be necessary.
On the other hand, if you hired Aunt Bertha to refurbish your bathroom–and part of the work order is installing a claw foot tub–then she’s be performing labor and that would require a 1099.
Can you see how the two situations are different? The 1099MISC is for labor performed. It’s not used when purchasing property–now that may change for next year–but right now, it’s not done.
Thanks so much for all the helpful information. I’m an independent contractor and my company is an LLC. The new W9 baffles me. I used to check the box for “disregarded entity” but that no longer exists. I’m told I shouldn’t even check the LLC box. Does this make me an individual/sole proprietor now? I’m also told the IRS prefers an SS# for my situation, but I got and EIN to protect my identity and keep my personal finances separate from my business finanances. What should I do?
I have a property that I leased to a trucking company in 2011 for 6 months. I had never rented the property before and did receive more than $600 from the trucking company, now i’m being asked to fill out a W-9 so they can issue me a 1099. Am I required to fill out this 1099?
We have an Antique Shopt and purchase our inventory from a variety of places, mostly individuals, often at garage sales and sometimes they call and ask if we are buying.
When I read about the repeal being related to Gold Buyers not being able to give a 1099 to each Gold seller, I thought that was similar to what we do.
Are we required to give a 1099 to your Aunt Bertha when she sells the claw foot tub from the upstairs lavatory?
Hey Valdez,
This may come as a surprise to you but you do own a business. You remodel homes and you run a ranch–those are both businesses. Issue the 1099s, your guys should be claiming the money you paid them as income so it’s fine to issue the 1099s. The only ones who are going to be upset are the ones who were cheating on their taxes. (I know that sounds harsh, but it’s true isn’t it?)
i was just informed today that i needed to give out 1099 to people who have worked for me .all though i am not a business i do have a tax number.for the last two years i have done small remodels ,custom, homes and also run a ranch of our own.the guys who work for me on the ranch also help on the homes ,i have always recieved 1099 ,but never issued a 1099.im sure there taxes are allready done and i need the labor deduction what do i do?
Hey Shawna–
You don’t realize it, but you’re one of the reasons that the government has gone all crazy with this 1099 reporting stuff. You just said that you weren’t going to report the income. But technically–you have to.
Now I understand–you’re just a middle man–you’re not making any money. But in reality, you’re supposed to report that you did take money in and paid it out. Now–you’re not really cheating on your taxes, you don’t have any extra net income. But the IRS doesn’t know that. All they see is that you’re taking in checks and not reporting that income. It would be an ugly audit–but you don’t ever need to go there. Report the income on a schedule E–rental income. Money in, expenses out. CYA.
hi gain,
I wasn’t planning in reporting any of it, as it was never really ‘income’. I had to people who paid me rent for my office, and I would then submit one check to the property owner for the exact same amount. I was just sort of the middle man. I had a lease that I couldn’t break, so I had to find renters to use the space until the lease was up. do i still need to report that?
@Kim,
Do report your 1099s. The example I gave Deb was something completely different. Real businesses reporting real income on real 1099s–you can document it all. It’s the right thing to do.
There are some people who “make up” 1099s to show income that they haven’t earned to get money for an Earned Income Credit. It’s a whole different type of issue.