Do You Own A Rental Property? Poof! You Are A Business Owner!

By
Mortgage and Lending with Network Funding, L.P. NMLS #2297, NMLS #222026

 

 

Own an investment property, file a 1099

 

Did you know buried in last September's Small Business Jobs Act of 2010 are new 1099 rules for owners of rental real estate?  For the 2011 tax year, the IRS will consider owning 1 or more rental  properties “a business” for purposes of the 1099 requirements. 

1099 more paperwork

 

This means property owners must file a 1099 with the IRS for any service provider paid $600 or more in 2011 for services.  Services can range anything from yard care to accounting.  Owners must provide a copy of the 1099 to each payee. 

 

There are exceptions... Congress has authorized the IRS to create exceptions that will exempt property owners from the 1099 rules in two cases:

1) If they receive only minimal amounts of rental income.  The IRS needs to issue guidance on what is considered a minimal amount. 

2) The rental income is mainly from the temporary rental of a former principal residence.

 

Pain in the butt

The process becomes even more tedious.  As part of the 1099 process, the property owner must obtain a taxpayer ID number (TIN) for each payee. If the owner is unsuccessful in collecting a TIN, the owner must withhold Federal Income Taxes from payments to that payee and send the withheld taxes to the government. 

Did you know, the IRS can assess a penalty of up to $100 for each failure to file a 1099 with the IRS AND for each failure to send a payee statement.

My prediction, accountants are going to be busier than ever working on 2011 taxes! Contact your CPA with questions regarding the new 1099 rules. 

As always, anyone with mortgage questions EMAIL ME, I am happy to answer questions. I am licensed to provide residential mortgages in Wisconsin, Illinois and Texas. 

Investors can read my latest blog entry about the new financing rules which allow an individual to finance up to 10 properties total.  The current rule is 4 total properties. 

(The old rule allowed an individual to finance up to 10 properties total.  With the economic downturn, the rule was changed to 4 properties.  Most recently, some lenders are allowing 10 total properties to be once again financed) 

 

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Rainmaker
571,495
Jon Quist
REALTY EXECUTIVES ARIZONA TERRITORY - Tucson, AZ
Tucson's BUYERS ONLY Realtor since 1996

In my day we used the phrase..poof, you're $%$#. Sounds like the IRS has now done that for us. Nice.

Great advice I will pass on when appropriate.

Aug 01, 2011 05:12 PM #1
Rainmaker
1,262,996
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

1099 reporting requirement for landlords has been around for a decade.  Most smaller landlords have ignored it and gotten away with it because there is no way for the IRS to determine unless they audit their schedule E

Aug 01, 2011 06:11 PM #2
Rainer
14,850
Lora Willms
Network Funding, L.P. NMLS #2297, NMLS #222026 - Mequon, WI
Mortgage Loans in Wisconsin, Illinois & Texas

Jon, thanks for the laugh!  I think you're right....it still means the same thing. Have a wonderful evening and thanks for reading my blog!  Lora

Aug 01, 2011 07:14 PM #3
Rainer
14,850
Lora Willms
Network Funding, L.P. NMLS #2297, NMLS #222026 - Mequon, WI
Mortgage Loans in Wisconsin, Illinois & Texas

Landlord Whisperer.... Love the Name!  No kidding..... people ignoring the government you say?  I think you're right, they will continue to take the chance and ignore it...Thanks for stopping by and taking the time to read my blog!

Aug 01, 2011 07:17 PM #4
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Rainer
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Lora Willms

Mortgage Loans in Wisconsin, Illinois & Texas
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