Draconian 1099 Laws for 2011 and 2012!

This is some real news. I heard from an anxious Property Management Broker in New Mexico today that he believed that 1099s would have to filed for and copied to, his tenants! But I did not find anything official that said you would need to provide a 1099 to your tenants, though I did see one NH blog that interpreted it that way. The preparer of the 1099 is issued from the payer for services/goods. I’m checking on that.

I think for 2011 it’s simply this: Get a W9 for all of your vendors, period. If they receive more than $600 from you in a year, they get a 1099, period. Which is already doable in all property management software applications that I know. Simply mark that vendor to received a 1099 and put in his TAX ID.

I’ve attached the IRS-authored Notice 2010-51 which was their explanation of the new laws. Also attached is the NAR (National Association of Realtors) informational broadsheet.

However, I did read up on this here: http://money.cnn.com/2010/05/21/smallbusiness/1099_deluge/index.htm

And here: http://www.dfwrealestate.com/news/new-irs-1099-requirements-landlords

And here: http://blog.pappastax.com/index.php/2010/11/12/new-1099-misc-rules-for-landlords/ - which had a great quote:

“There is something very smelly about the federal government forcing its citizens to provide information to the IRS about the nature of their relations with other citizens. This last is more evidence that the IRS, at least under this administration, fully intends to draft ordinary Americans to help it do its job.”

And here: http://www.release-news.com/index.php/business/43860-orlando-cpa-explains-irs-1099-requirements-for-landlords-coming-in-2011.html - This article says that

there may be exemptions for those property owners who can prove undue hardship.

BOTTOM LINE FOR REAL ESTATE

• Current Law: Information reporting requirements apply only to businesses.

• 2011 Rule: ALL persons who receive rental payments must provide Form 1099. This affects ALL owners (both individuals and businesses) of rental properties, both residential and commercial. Thus, “mom and pop” investors and those who invest in real estate for their personal portfolios are subject to the new reporting requirement. Only aggregate annual payments of $600 or more for services (but not goods) must be reported.

So – if I’m reading this right – As an Agent for your Owners…You the Property Manager will be obligated to send a 1099MiSC to the tenant for Rents received?... Nah, we’ll need to check on that. But I don’t think that’s how it really is interpreted…I think it’s ONLY for services you pay for on rental properties that generate more than $600/yr in income. Which, really, was already true for any non-incorporated vendor. Now it’s true for any vendor in 2011. Like me, the vendor which has received 1099s for services rendered. - kari

• Additional 1099 Reporting Requirement for 2011 -- Landlords - The recently-enacted small business legislation (HR 5297) included an expansion of the 1099 reporting related to a trade or business. To date, only those real estate professionals engaged in property management-type businesses have been required to file Forms 1099. Congress has extended the Form 1099 requirement to any person who receives rental income. This requirement would apply to any landlord (including a small investor), rather than only those who are in the business of managing property.

• Starting in 2011, any person who receives rental income must provide a Form 1099 for all payments of $600 or more made to service providers such as plumbers, carpenters, yard services and repair people. The purchase of goods is not included within the reporting requirement. The Form 1099 is provided to the IRS and to the service provider. The new requirement applies to both residential and commercial property.

• 2012 Rule: All businesses, including real estate businesses, self-employed individuals and independent contractors will be required to make a 1099 report of any aggregate annual payment of $600 or more to any person from whom they acquired goods and services.

And wow – OMG – that is just ridiculous!
I think (personally) everyone should just proceed as if this “law” never took place and see how much the IRS (the Federal government) is willing to spend to track down and punish those who disobey a completely nutty law. And the 2012 version with all goods included, means if you buy a PC over $600 – you are responsible for getting a W-9 (taxID) for Dell and sending the form to Dell? NUCKING FUTZ with a capital “N”!!!

The quote I saw in the CNN article was the best: "Just with business travel it would include hotels, rental cars," Henschke says. "Phone service: 1099. Computer service: 1099. Whoever does your postage meter: 1099. You do a little advertising, Yellow Pages: 1099. Your landlord: 1099. You might as well just keep them in your pocket and hand them out as you go around every day." - like candy...

Thanks so much for reading! Please let me know if you find any other interpretation of this law.


Kari Bunch
972-220-9580 (voicemail)
817.977.6630 (fax)
"Always read stuff that will make you look good if you die in the middle of it" - P.J. O'Rourke
http://www.karibunch.com