Discussion Archives:1099 reporting now required for rental properties - 2010 Jobs Act

From the Small Business Jobs Act of 2010:

Require Information Reporting for Rental Property Expense Payments. The bill requires persons receiving rental income from real property to file information returns to the IRS and to service providers reporting payments of $600 or more during the year for rental property expenses. In general, there is an exception for individuals renting their principal residences, including active members of the military, from the reporting requirements. This provision is estimated to raise $2.5 billion over ten years.

So how is this supposed to work anyway - I guess we can just call up the corporate offices for Lowe's and Home Depot and Wal-Mart and request their TINs? I'm sure they're going to be thrilled.

BTW, am I correct in understanding that *this* provision begins for tax year 2011 (with the info returns due 2012) and the info reporting requirements in the health care bill (aka "everyone else") begin with tax year 2012 (with the info returns due 2013)?

What a mess.

If the IRS wants to increase reporting in this area, why don't they just set up an online portal for people to electronically send 1099 forms to the IRS? It would be so easy; they already have EFTPS set up to work automatically. I don't understand how the IRS is going to have the manpower to process all the additional forms. Maybe in 10 years when (hopefully) the process is completely electronic, but not now.

Oh, you didn't get his ID#? That's now *your* problem.

Unbelievably complicated and yes this will overwhelm IRS but maybe they're just interested in the low-hanging fruit like the thieving SOB, above, who *didn't even file a return* to report his [previously unreported] $50,000 gross receipts. We all want him to pay his share, don't we?

The new provision in H.R. 5297 changes the situation for owners of rental properties who don't consider their rental activity as a business (e.g., investors, not-for-profit resort rentals, etc.). Right now, they aren't required to issue 1099s since their payments to the plumber, painter, repairman, etc. does not occur during the course of a business. But under H.R. 5297, IRC §6041 is amended to provide that taxpayers who receive income from renting real estate are deemed to be engaged in a business for purposes of the information reporting requirements. Exceptions are provided for members of the military or intelligence communities who rent their residences on a temporary basis, individuals who receive only minimal amounts of rental income to be specified in regulations, and individuals for whom the reporting requirement would cause a hardship.

The new provision affects payments made after 12/31/2010, i.e., 1099s required to be filed in 2012.

Private contractors such as office maintenance, trade contractors, - I can understand a 1099.

Yes, this is going to cut down on people who think that anything not on a 1099 isn't reportable income. And there are a lot of them out there.

Regarding the increase in information reporting penalties: Section 2102 of HR 5297 says that the $50 penalty increases to $100, and the aggregate annual limitation goes from $250k to $1.5 million. There are also changes to the amounts by which penalties can be reduced for corrections within 30 days. Links to the legislation and some other recaps can be found here: Discussion:New Jobs Act passed by the House.

The possibility to exclude payments made by credit card from information reporting has come up several times in connection to the changes in the Health Care bill, as discussed in Shulman's remarks about CC payments or Kathyt's May 28 post here, et al. There are no proposed regs on those changes related to 2012 payments/2013 reporting yet, so that's simply an expectation at this point. edited to make this correction: However, as Dave points out below, the previously existing regs related to the new 1099-K form (from the Housing Assistance Tax Act of 2008) already provide an opportunity for credit card payments to be excluded from 1099-MISC reporting, starting 1/1/11. See Dave's post, below, for more info on that.

The IRS has announced that this exemption will apply to the new information reporting requirements. IRS News Release IR-2010-79 (July 1, 2010) (http://www.irs.gov/pub/irs-news/ir-10-079.pdf). The IRS has asked for written comments from interested parties as to how they should apply this provision. Notice 2010-51, 2010-29 I.R.B. 83.

And that's effective for payments made in calendar years beginning after December 31, 2010 - so, as it's currently proposed, that would affect 2011 payments/2012 reporting. I will edit my post above to make corrections.

Adding: and sure enough, the duplication fix is discussed right there on page 20, the very page you'd pointed us to on the other discussion. Thanks for endeavoring to help; sorry it took two tries with me!

They're encouraging the use of credit cards, electronic transmission of refunds to debit card accounts and/or checking accounts, and then wonder why there's so much identity theft problems.

Okay, I split an infinitive. Skewer me!! I could have split three!

Trillium, must be the "less observant with age!"  ; )

Sometimes it's 3 or 4 with me....

I see the new 1099 reporting requirements as nothing more than to record the income of non-employees as we do with employees by requiring a W-2 to be issued. It's been a long time coming, and I think it will generate a lot of lost revenue. If we ALL contribute our share, those of use who do claim all our income will contribute less. Unfortunately, with offloading credit card purchases reporting to the Merchant Services company, purchasers will be motivated to use a credit card, making even more income for Merchant Services. But, then, maybe that will be a way for them to defray some of the costs of the program.

Credit Card Paid Expenses $ 450,000

(a lumped together expense of capital fixed asset purchase transactions, real estate taxes (as governments are beginning to accept credit card payments), entertainment expenses (of which only 50% deductible), telephone expenses and automobile expenses (some of which are personal use), credit card interest expenses, nondeductible personal expenses etc. etc). Then don't forget - there's commingling of credit card accounts.

But, what the hell, so long as it's charged on a credit card, no 1099 needs to be issued.

Isn't that simple?

"Compliance and cooperation are not the same thing." --Woodrow Paris

Thankfully neither of these individuals is my client. The first one asked my wife about my services. Behind his back, I violently shook my head side to side causing Pam to tap dance, telling him that I did not do businesses.

Uncle Sam, you'd only end up with an account like Credit Card Paid Expenses if you were preparing returns from documents presented by the taxpayer (1099's) rather than from accounting records.  ; )

Soloman, Do you really think this will be repealed after the first year?....after all the new income they'll see reported??  ; ) And, when they see a sizable increase over prior years, will the IRS then audit those in particular to see if they *cheated* the years prior to the 1099-K, 1099-MISC for Corps new requirements? Too bad some of these negative/positive outcomes can't all be predicted before we begin.

OCN, I was referring to the expansion of 1099-MISC reporting in PL 111-148 (Section 9006) to corporations and for property and other gross proceeds - §6041 - not the 6050W part of this discussion.

§6041 says this, "All persons [now to include corps per §9006) engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, [etc]...."

Actually, my remark/question intended to include ANY/ALL income reporting whether it be by the merchant or otherwise. What catches my attention now is:

"engaged in a trade or business"

This says to me that a housewife who hires a contractor to build a fence for $800 is NOT required to file a 1099 on him. This is contrary to my understanding..I thought EVERYONE had to do it.

I think this is a step in the right direction to match with how we've reported employees with W-2's for years..but, it may be too much too soon. Seems a couple of years to streamline the merchant reporting might have been a good first step.

The government is always looking for a penalty generator "the two fer" these days, that's why they kept it at $600. The more 1099s, the more chance one won't get issued, the more penalties. The government learned this trick from the banks and their BS $35 dollar NSF's and the other "gotcha" stuff.

Also, I have to wonder if the postal service (which is broke, not a little broke, but broke broke) had a hand in this somehow. When you set this at $600, you are basically reporting the economy. That's a lot of mail. I'm out of the loop these days, but don't most 1099's still get mailed?

I mail 1099's now, but I'm seeing returns/forms that used to get mailed are being moved towards online filings..like the State Board of Equalization (Sales Tax for CA) and the CA Statement of Information, to mention a couple. And, eFile will be a must soon for tax returns, I think. But, with this new 1099 system, I envision an online portal for filing 1099's, and maybe even looking up missing EIN/SSN's. It would even be smart to have a login for recipients of 1099's to check in to see what's been filed against them, and take action to correct if they see one in error. And maybe they'd even have a place to search for amounts that Merchants(1099-K's)have filed. I think Obama has allowed for 16,500 new IRS agents to penalize our failings, but will we have dollars allotted for this front-end setup? Bottom line, I truly think the increased tax revenue will far surpass any dollars spent to set it up and maintain it.

Regarding the $600, there are quite a few professions who make little from many. That adds up to a LOT!  ; ) ..gardeners, hairdressers, etc...probably why they left it where it was.

Thanks, Szp, I just got an EIN in a matter of minutes at the IRS site!! I didn't think Sole Proprietors were entitled to one. I was concerned with having to give out my SSN for 1099's.

       Why not do what other countries do?  In Chile, for example, any "contractor" needs to have a book of "boletas" (receipts): The boletas have his/her name and RUT (tax ID). If you pay someone, they give you a boleta.  The Chilean equivalent of the IRS checks the boletas -- but it's the contractor's responsibility, not the payer's.  As to vendors, essentially the same thing:  Every time you pay, you get a receipt, and the business needs to account for the receipts.  Should work the same here:  If the landlord got a receipt from the hardware store, the income should be in the hardware store's books.  (How is this enforced? There are heavy fines for not issuing a receipt or boleta -- just like in many stores in the US there's a sign that says "if you don't get a receipt your purchase is free . . ."  I've seen store owners chase a client down the street to make sure they took their receipt . . .  And inspectors used to get on the buses to make sure that the driver had issued receipts to all passengers.)

Dh, The problem is, there ARE no heavy fines if nobody gets audited. I see massive cheating, and taxpayers seem to think that what they are doing is right because the IRS has not come down on them....YET.  ; ) Somehow the HONOR SYSTEM doesn't seem to work when it comes to parting with cash.

I have a question I need an answer for. I send payments to realestate agencies for owners of properties, who am I suppose to send the 1099 to. Some of the people in the office are saying the owner and others are saying the agent16:26, 16 February 2012 (UTC)

I have a question I need an answer for. I send payments to realestate agencies for owners of properties, who am I suppose to send the 1099 to. Some of the people in the office are saying the owner and others are saying the agent16:26, 16 February 2012 (UTC)