Rental Properties & 1099-MISC Requirements 


    As a result of the repeal, there is a misconception that landlords do not have a 1099-MISC filing requirement.  However, the historical 1099 reporting rules continue unchanged.  Furthermore, the increased penalties for failing to file Form 1099 are still applicable.

     

    To clarify, in 2010 The Patient Protection and Affordable Care Act (PPACA) expanded the 1099 reporting requirements to all payments for goods and services from businesses totaling $600 or more to a single vendor, including corporations.  The Small Business Jobs Act (SBJA) extended the requirement that landlords, no matter how passive the activity, must issue Forms 1099 to vendors for payments totaling $600 or more beginning in 2011.  The SBJA also increased penalties for not filing a 1099.

     

    On April 14, 2011, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 repealed both the expanded Form 1099 information reporting requirements mandated by the PPACA and the 1099 reporting requirements imposed on landlords by the SBJA.

     

    However, under Sec. 6041(a) “All persons engaged in a trade or business and making payment in the course of such trade or business to another person of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income” of $600 or more must report the amount, the name and address of the recipient of such payment. 

     

    New to the 2011 Schedule E (Form 1040) are questions A & B.  Question A asks:  “Did you make any payments in 2011 that would require you to file Form(s) 1099?”  Question B asks:  “If yes, did you or will you file all required Forms 1099?” A landlord, regardless of the repeal, could easily have a Form 1099 filing requirement making these questions relevant.   

     

    For example, a landlord who pays an attorney $1,000 to collect unpaid rent on their behalf would need to file a Form 1099-MISC.  In this case, the taxpayer would have to answer YES to question A on Schedule E and should file Form 1099.  There are some exceptions (e.g., certain payments made with a credit card where the merchant has assigned a Merchant Category Code (MCC) indicating that reporting is not required) allowing the taxpayer to answer no to both questions A & B, on Schedule E.

     

    In general, a taxpayer or tax practitioner should reference the 2011 Instructions for Form 1099-MISC to answer questions A & B correctly and to be aware that rental property owners are not excluded from having a Form 1099-MISC filing requirement.



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