Receive Rental Income of $600+ a Year? New IRS 1099 Requirements for Landlords Affect You

Starting in 2011, there are new tax requirements for landlords.  All landlords who receive rental income of more than $600 a year from a tenant must file a Form 1099 information return for all income received and send a copy of the 1099 to the tenant.  Landlords must also send a 1099 to all service providers who received payments of $600 or more during the year, such as plumbers, carpenters, yard services and repair people.

The new requirement applies to owners of both residential and commercial property.  The only exception to the new requirements occurs when an owner temporarily rents out his/her primary residence, so long as the owner’s income does not exceed a “minimal” amount to be determined by the IRS.   Prior to 2011, this requirement had only applied to those involved in full-time property management, but now the requirement covers all types of landlords.  Landlords will need to gather federal tax ID numbers from both their tenants and service providers in order to file the 1099’s.  Failure to file the 1099’s with the IRS can result in fines of $50 per 1099 not filed with the IRS.

NAR actively opposed this change in the law and is working with others to have this requirement repealed or otherwise modified.  Congress took this action in order to assure that income paid to contractors can be verified through a 1099.  To read more about the history of the law as well as the action NAR has taken to oppose this change in the law, click here. Or listen to this related podcast from NAR.