If you own rental homes the federal government has made your world a bit more complicated in 2011. Buried in the Small Business Lending Fund Act that passed in 2010 there was a new provision for rental home owners. Now every time you work with a contractor that charges you over $600 you will have to 1099 them.
According to the bill’s proposed new rules on rental property, owners who pay $600 or more for a service such as plumbing, landscaping or painting, would be required to issue 1099 forms to the IRS and whoever provided the work.
“Under the provision, recipients of rental income from real estate generally are subject to the same information reporting requirements as taxpayers engaged in a trade or business,” the JCT reported.
The new rental reporting requirements would go into effect on Dec. 31 this year and would likely affect millions of property owners, say taxpayer advocates.
“You’ve got to be kidding me,” said Tom Schatz, president of the watchdog group Citizens Against Government Waste, when told about the provision. “Honestly, it’s an outrageous burden for rental owners.” via Washington Examiner
And you think that you will ignore giving Washington more information on your business? Think again, if you are caught not 1099′ing your contractors you could face fines up to $250,000 for failing to get the required information.
My advice, which really does annoy me, is to get the 1099 form filled out by every vendor you work with for your rental properties. The cost of non compliance is too high, and as a group you are being targeted by the Federal bureaucracy.
Oh, and you heard on the radio or TV that the government is going to repeal onerous reporting requirements for small businesses? You are right on that one, but as a rental property owner, you are not included in that group. Your new tax reporting requirement was buried in a different bill.
This truly is unfortunate and incredibly frustrating. Obviously putting forth the effort to get the forms filled out by every vendor is a lot better than paying $250,000 in this economy, but I think the policy is ridiculous.
What else is new. The government has found even more ways to make more money from us all. Equally as great is the extra paperwork.
This is frustrating. Instead of helping us resolve previous issues, they continued to make us suffer and added new problems on top of it.
I love how they pass bills like this by burying them in other bills and to top it off they are usually not even that similar. Gotta love politics and the money making machine…
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ITs enough work keeping your fingers on the pulse of the information you need to know. I have buildings that are subject to reporting requirements that have no pactical purpose as I see it, were obvioiusly woven into the system by well meaning representatives who don't understand the inoracticalties of what they are doing. It's an added expense of doing business, and if you're going to be in it, you have to do it the way it needs to be done.
This one is tough. Can you issue 1099's contemporaneously with the invoice payment? Maybe they could build it into quick books
Swell. Something else to convince people not to invest yet in the tons of rental real estate still sitting on our market depressing prices for all real estate here in Florida.
I agree with Sarasota real estate, above. Here in Tampa, Florida we have the same overhang of short sale and foreclosure rental properties while we're hoping investors will snap them up at bargain prices and get them off the market. We don't need things that discourage that.
This is really unfortunate, and makes life a whole lot harder on home owners and renters. I don't think to many people know about this and will actually be following through. I know in Walnut Creek a lot of these Fixer Upper Homes you can find on the Walnut Creek MLS need lots of work from different Contractors, I know it will create a lot of trouble for me and my properties.
Does anyone know if this applies to vacation rentals as well?
This is a lot of work. I agree, get the forms filled out by the contractors as part of the first work order of the year.
How could the rental owners afford this? I think this is too much for them. But actually, the policy is just fine, but the idea of getting all the services associated with your business be recorded, that's too much. For the government they will have accuracy in tracking down taxes.
This is really unfortunate…
Pretty soon we'll be speaking Mandarin!!!!!
If you are going to hire a vendor/contractor to complete work at one of your rental properties, before they get paid, require a W-9 be filled out to prevent you from trying to track down the information at the end of the year.
As a property manager, I require all my vendors to complete a W-9 before they are assigned jobs at any of the properties I manage.
The new rules on rental property definately will make all property owners suffer to the core.
I agree with Sarasota Real Estate, too. I'm concerned that this could just be one more thing to discourage investors.
I will pass this along to people because I don;t think many people are aware of this. I know I was not.
Thanks for sharing this.
I think I should probably get into real estate after I graduate from college so I can learn all this.
Wow.. what a pain. The government must be broke and scratching for every dollar they can find. A 250000 fine! That's a bit uncalled for.