Are you a landlord? If so the IRS has new tax laws that will affect how you handle your rental property business.
And yes they see it as a business more than an investment. This year a new 1099 form will be required from handymen or any other vendors that provide service and work on your rental properties, specifically work that is over $600. These 1099’s must go to contractors that don’t already get a W2 from a company. So the Roto Rooter plumber is most likely not a candidate for a 1099. But handyman X that is self employed will require a 1099 from you.
This is a modified law more than a new law. For years large property owners and managers have had to issue 1099 forms to their vendors, but now you as a single property own will have to as well. This law was birthed from the Small Business Jobs Act of 2010.
When Does this Tax Law for Landlords Take Effect?
This new law takes effect for the 2011 tax year, so collect those 1099 forms from January on. If you’ve had work done in January and haven’t collected forms yet, do so now. It may be that over a course of months you pay a vendor over $600, in that case track your expenses and once they reach $600, send them the form. Make sure you keep a copy for yourself. You’ll have to make sure you send the forms by early 2012.
There are a few exceptions to this rule – if the property is a temporary rental of your own residence, collecting the information is impossible, or the money made off the property doesn’t surpass the minimal threshold (ask a tax expert about this threshold). Vague enough? I know. The IRS hasn’t actually put in place guidelines for some of this. Of course there will be penalties for filing late, up to $250.
Why is the IRS Changing this Law for Landlords?
So why is this happening, well think of the bigger picture. If you aren’t providing plumbers and other handymen with 1099’s then what are they using to report income on their taxes? Probably nothing correct?