Attention Rental Property Owners

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NEW IRS FORM 1099 REPORTING REQUIREMENTS FOR 2011

 

As reported in our last newsletter, the Small Business Jobs Act of 2010 provides broad tax breaks and incentives for small businesses and entrepreneurs.  However, there are many provisions of the Act that put in place new revenue creating opportunities for the federal government.

 

One of those revenue generating provisions impacts rental property owners.  Beginning in 2011, rental property owners will be subject to the same reporting requirements as taxpayers engaged in a trade or business. The Act requires rental property owners who receive rental income to issue an IRS Form 1099-MISC to report payments totaling $600 or more during the course of the year for any expenses related to their rental properties. The provision will apply to payments made after December 31, 2010.  The reporting requirements will include payments made to contractors performing work on the rental properties, such as carpenters, painters, or plumbers. Furthermore, there are penalties for each 1099 that the rental property owner fails to file or files late.

 

Rental property owners who can demonstrate that the new filing requirements will create an “undue hardship”, or those who receive “minimal” rental income, may be able to avoid the filing requirements, but the IRS has yet to provide specific guidelines to clarify who would be exempt.

 

Rental property owners should start keeping detailed records of payments to service providers, so they can issue accurate 1099’s at the end of the tax year (in early 2012). In that regard, before making any payments of $600 or more to service providers, rental property owners should use IRS Form W-9 to obtain the name, address and taxpayer identification number (social security number for individual sole proprietors, and employer identification numbers (EIN’s) for businesses) of each service provider.

 

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Harrisburg Magazine Readers' Choice 2011