1099 Rules for Landlords and Small Businesses

Posted on: 01/12/11 383 Comments

1099 Rules for Landlords and Small Businesses

 

Are you confused about the rules for small businesses and landlords issuing 1099’s for anyone that they’ve paid over $600 to?  Has a company asked you to fill out a W9 form because you or your business is doing some kind of work for them?  It seems like everybody is a bit confused, even the IRS.  But here’s help.

 

UPDATED JANUARY 2016
The rules have changed several times since the original post. If you’re preparing 1099s or tax returns for tax year 2016–these are the updated rules.

 

The  1099 law is actually part of the Affordable Care Act although it has nothing to do with health care.  Is your head spinning yet?  Seriously, the 1099 law states that businesses will be required to issue 1099 forms to contractors that they have paid over $600 to.

 

So who gets a 1099 MISC?  Basically, if you own a business, or are a landlord, you need to issue a 1099-MISC to anyone  that you’ve paid over $600 to for labor.  So, let’s say you pay a computer programmer to set up your office system – you’d issue a 1099 MISC.  But if you buy a computer for $1000 – then you don’t.  Confused yet?

 

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

 

If you need to prepare 1099s, here’s a link that will give you information on how to do it: How to Prepare a 1099

 

If you’re a landlord or small business owner you should expect that you will need to file 1099 forms for your contract laborers this year.  Start collecting information from them now so that you’ll be prepared come January.  You’ll need a W9 form, here’s a link:  W9

 

Print it out and have all of your vendors sign one.  You can be hard-nosed about this too.  No W9, no payment.  It’s that easy.

 

If a business that you provide a product or service to asks you to complete a W9 form, it is a legitimate request.  If you’re a sole proprietor and don’t have an EIN number, you may want to apply for one so that you’re not giving out your social security number all over the place.  If you’d like more information on EIN numbers, read my other post:  Free EIN

 

You can get an EIN number directly from the IRS for free.

 

One question that I’m always asked is, “Is there any way to get out of having to issue a 1099?”  The answer is, “Yes.”  If you pay a vendor with a credit or debit card, you do not have to issue a 1099.  The reason is, when you use a credit card to pay a vendor, the credit card company will be issuing a 1099K statement showing the payment you made.  So, it you want to reduce the 1099s you have to issue, use your credit card more often.

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383 thoughts on “1099 Rules for Landlords and Small Businesses”

  1. Hi We paid our landlord a security deposit and first months rent during 2017 – but won’t have access to the premisis until later in 2018. Do I 1099 for the security deposit (10 year lease) and the first months rent, or just the first month’s rent, or… nothing at all?

  2. Hi Ab,
    If you are an individual, then no. If you are a business, than you might have to. For example, your business a condo in a business condominium building But I’m thinking you’re a homeowner. Maybe even a homeowner that runs a business out of his home? But even then, it’s Ab the homeowner paying the condo fee. You claim the condo fee as part of your home office expense, but you wouldn’t need to issue a 1099 if that were the situation, the condo fee is still a personal expense.

  3. Hi Jan,
    We pay monthly dues to housing/condominium association. This includes a monthly base fee and additional fees for cleaning or snow removal. Do I have to issue the housing association a 1099-MISC?

  4. Hi Jim,
    I want to make sure that I understand. The non-profit pays the rent for a few community members. So for example, let’s say I qualified for this program, they would pay my rent to my landlord, right? They are not paying the money to me.
    So, the landlord is who receives the 1099. The landlord being – either the home owner or the real estate agency, right?
    If I am understanding correctly, I would think that you would also issue a 1099 to any real estate agency that is receiving rent as well. (Unless the RE agency is a corporation, because you do not have to issue 1099s to corporations.)
    That said, before I did that tax thing – I was in real estate. Most real estate companies are partnerships, not corporations. (The tax treatment is usually better that way.) So you’ll want to ask those companies for a W9. If they’re corporations, then you don’t need to issue the 1099, but if they’re partnerships, you still do. (And yes, some of those businesses are honking big partnerships that you would think are corporations, but you still have to ask. Sorry.)

  5. Hi Jan,

    I’m responsible for issuing 1099s for a Non-profit in CA and NV. We pay rent for a few community members, some to Real-estate agencies and some to home owners renting a bedroom or unit in the home they own. Can you confirm my understanding that we do not provide a 1099 to a real estate agent for rent paid but we do provide a 1099 where the payment is made to the owner?

    Thanks,
    Jim

  6. Hi Charlee,
    You would issue 1099s to the vendors, because you pay the vendors. The Owner would issue a 1099 to you, because the owner pays you. Now – what I see quite often is management companies issuing 1099s to Owners because the management company collects the rents for the owners also. So you may have to issue 1099s to owners and vendors.

  7. We manage properties and for one of our accounts, we pay the vendors invoices for the properties and then the Owner reimburses us. Would we 1099 the vendor or the owner?

  9. Dear Help Me,
    For what purposed does your landlord/HOA want that. The 4056 form is to request a copy of your tax return. Why do they need that? Are you already living there? Or are you looking to move in? Full disclosure here, I used to be a landlord – I was the vice president of a real estate company. We never requested tax return transcripts on our tenants in any of our buildings.
    Now, I suppose that some buildings that have government subsidies might request tax returns. For example: if you’ve applied for section 8 housing, then I could see the tax return requirement. That’s a different situation, you would need to prove you have low income for that. If you are low income, you might be able to have the IRS provide you a documents saying that you are not required to file. That would probably suit the purpose for your landlord.
    If this is not a low income situation, and you really should have filed, then I don’t know why they want your tax return transcript. Proof of employment and a few references should do the trick.
    Can they force you to provide a 4056? I don’t know. You might need to ask an attorney. My gut says it’s suspicious that they’re asking for it. But I don’t know the law about that and I can’t give legal advice. Sorry.

  10. I work for a nonprofit and we have unpaid interns. We reimburse them for mileage, etc. Should they receive a 1099 from us if we have made reimbursements to them over $600?

  11. I am being “requested” to allow my landlord/hoa to file a 4056-b. I haven’t filed my taxes and i would rather not raise any red flags with the irs. Can they force me to provide it to them?

  12. Hi Tracy,
    I guess you could issue yourself a 1099MISC for your bookkeeping fees. I started to say no, but why not? Your bookkeeping business is a separate business from your rental real estate.

    Here’s the thing: you mention needing your investment income to be lower – I’m going to make a leap here and guess you may qualify for the earned income tax credit if your investment income is low enough.

    If that’s the case, you are going to want to substantiate the heck out of this. Document, document, document. Is this a legitimate expense? Is your business income legitimate? How are you going to prove it?

    Since you’re the bookkeeper, I’m assuming that you can substantiate what you’re doing. Dot your i’s and cross your t’s. And plan on issuing yourself a 1099 for bookkeeping in the future as well.

  13. We own two rental properties, on in only my husband’s name, one in both of our names. Can I 1099 myself for bookkeeping fees? We need the investment income to be lower on our taxes. I realize I would then have to pay self-employment taxes.

  14. Hi Carolyn,
    It’s perfectly normal and appropriate for a business tenant to request a W9 from you and issue you a 1099MISC for rent paid. That’s actually been the rule for a couple of years now, but us accountants have been a little slow to pick up on it. I would bet that your tenant’s accountant said, “Hey, how come you didn’t do a 1099 for your rent?” And that’s why she’s asking.

  15. I am a member of an LLC that owns a small rental retail building. For the first time, one of our tenants has requested a W9. I didn’t think that rent was one of the payments that required a 1099, so I was surprised by the request. Am I wrong?

    PS, thanks for your very helpful website!

  16. Hi Pat,
    As I understand it – non-profit companies have the same obligation to provide 1099s that regular companies do. So what you’re going to want to do is have all of the landlords that you make payments to complete a w-9 form.

    You won’t need to provide 1099s to the corporations, but you will to everyone else.

    Now, you’ll probably get some push back. Folks will say, “Hey, you don’t need to issue me a 1099 because I’ve got a corporation!” Fine, they fill out the W-9 that says they are a corporation. You don’t know they’re a corporation until they give you the paperwork.

    And, if they really give you a hard time about filling out the form, then you just withhold 28% of what you’d pay them. That’s the IRS withholding rate when a company won’t provide you with the proper information. (It’s amazing how quickly those landlords will comply once you start withholding 28% of their rent because “it’s the law!”)

  17. If a non profit organization provides rental payments to assist clients, do we need to issue a 1099 for those rental payments to all landlords? The landlords run the entire range of business types from an individual owner who is the landlord, to LLCs, incorporated companies, large property management companies and large apartment complexes. Thanks for any input!

  18. Hi Linda,
    Wow, I had no idea what a tough question that was. Many years ago, I used to work in real estate and that was a very important question for us. They had actually gotten in trouble with the IRS over that so I didn’t want to shoot from the hip and give you bad advice. So I went to do a bit of research first, and got about 20 different answers. Yowza!

    So let’s start with the IRS first. Which, quite frankly was kind of hard to pin down. But according to IRS Publication 15b (there’s also pub 15 and 15a just so you know) you can exclude the value of the lodging you furnish from an employee’s wages if it’s furnished on your premises, it is furnished for your convenience, and the employee must accept it as a condition of employment.

    So – to me, that sounds like a legitimate situation for you. Your caretaker is an employee, she needs to be on the property, and it’s for your convenience so her rent reduction is a non-taxable event.

    You do want to have a job contract – spelling out how many hours she would work, what she does, etc. But there would be no taxable wage and no FICA (social security and medicare) either.

    That said, you might want to check with your state division of employment security to see if you need to pay your state unemployment. Just to be on the safe side.

    So for me, using the IRS Publication 15B – I’m going with non-taxable fringe benefit, no 1099MISC. The reference I’m talking about is on page 15.

    But I saw other blogs out there going in different directions – one absolutely recommending the 1099MISC, another absolutely saying it was illegal to give a 1099MISC to a property manager, and another one about how to make sure your property manager qualifies for a 1099 and not be an employee. Wow!

    A blog that I like is at Nolo. Here’s a link to their post about hiring resident managers: Tax Rules for Hiring Resident Property Managers

    I don’t get paid to link to their site or advertise for them or anything like that. I just like their articles and I find them easy to understand. (Okay, you’ll also notice that the Nolo blog agrees with my opinion which is probably why I like it.) But if you google the topic, you’ll get other answers.

  19. HI Jan,

    We own a guest house and our caretaker gets a 450 rent reduction in exchange for 30 hours of contracted services exch month/ Does she get a 1099?
    Thanks so much.

  20. Hi Rachel,
    If 1099s were issued to him, but he just can’t find them, he can actually get them online from the IRS. Here’s a link: Tax Transcripts

    He can set up an account and then he can get his “wage and income transcript” which should show all of his 1099MISC forms.

  21. Hi Dekei,
    A landlord does not issue 1099s to tenants. A 1099 is issued to contract laborers. You would only issue a 1099 for payments made in 2017 for the 2017 tax year – which will be due by January 31, 2018.

  22. Hi, this is a very simple question. I have a friend who owns an LLC who closed down this past year and him and his partner, who managed the business closed and went their own ways. My friend says he knows they used to get 1099’s for fixed cars, since the business was an automotive body specialist, fixing damaged vehicles. He has not seen any 1099’s how can he get copies so he can properly file his tax returns?

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

  26. Hi Jan,

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

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

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

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

  35. Hey Jan,

    Happy Monday.

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

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

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

  39. Jan,

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

    What forms do I have to issue him?

    Thank you

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

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

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

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

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

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

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

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

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

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

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

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

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