New law creates big tax headache for rental property owners

[Dont Taz Me Bro]

As reported by the Examiner’s Susan Ferrechio, a provision of the Small Business Jobs Act passed by Congress last fall mandates that rental income be subject to the same tax reporting requirements as a business or trade. The law went into effect January 1st. I’ll leave it to the Journal of Accountancy (it’s one of your morning must-reads, right?) to explain what this means for property owners:

Thus, rental income recipients making payments of $600 or more to a service provider in the course of earning rental income are required to provide an information return (typically, Form 1099-MISC, Miscellaneous Income) to the IRS and to the service provider. This provision will apply to payments made after Dec. 31, 2010, and will cover, for example, payments made to plumbers, painters or accountants in the course of earning the rental income.

While rental property owners will not actually issue the required 1099s until early 2012, they need to start keeping adequate records of payments starting Jan. 1, 2011, so they will be prepared to issue correct 1099s. They will also need to obtain the name, address and taxpayer identification number of the service provider, using Form W-9 or a similar form.

Washington Examiner

Well isn’t this just dandy. I have owned rental property in the past and I happen to be in the process of acquiring a new one at this very moment. What possible service could this reporting requirement serve? How could this benefit anyone other than bureaucrats in D.C. who need a job? This does nothing at all other than burden small business owners and rental property owners with excess paperwork and regulation that seemingly do nothing. This is the kind of inanity that I want to see the new Republican House tackle and rid us of.

 

[loosecannon]

1099 forms are used to track income and esp to create a record of otherwise unreported income.

 

[Bern80]

As reported by the Examiner’s Susan Ferrechio, a provision of the Small Business Jobs Act passed by Congress last fall mandates that rental income be subject to the same tax reporting requirements as a business or trade. The law went into effect January 1st. I’ll leave it to the Journal of Accountancy (it’s one of your morning must-reads, right?) to explain what this means for property owners:

Thus, rental income recipients making payments of $600 or more to a service provider in the course of earning rental income are required to provide an information return (typically, Form 1099-MISC, Miscellaneous Income) to the IRS and to the service provider. This provision will apply to payments made after Dec. 31, 2010, and will cover, for example, payments made to plumbers, painters or accountants in the course of earning the rental income.

While rental property owners will not actually issue the required 1099s until early 2012, they need to start keeping adequate records of payments starting Jan. 1, 2011, so they will be prepared to issue correct 1099s. They will also need to obtain the name, address and taxpayer identification number of the service provider, using Form W-9 or a similar form.

Washington Examiner

Well isn’t this just dandy. I have owned rental property in the past and I happen to be in the process of acquiring a new one at this very moment. What possible service could this reporting requirement serve? How could this benefit anyone other than bureaucrats in D.C. who need a job? This does nothing at all other than burden small business owners and rental property owners with excess paperwork and regulation that seemingly do nothing. This is the kind of inanity that I want to see the new Republican House tackle and rid us of.

Frustrating as all hell. If government really wants this country to be prosperous than they need to quit making it so damn much of headache to make money.

 

[Oddball]

This will just mean more people operating rental properties off the books.

Rand was right...Everything that isn't illegal is being made mandated.

 

[uscitizen]

1099 forms are used to track income and esp to create a record of otherwise unreported income.

Yep I heard the same whine the other day at the country store. Apparently most of the rental property owners in my area do not report much of their rental income for taxes.

They do not seem to report hiring illegal immigrants either....

 

[Zander]

The Republicans in the House should overturn this POS. It will send a strong message that they are serious about tax reform. Of course that is just a start.....

 

[uscitizen]

Yep overturn it we need more holes for people to avoid paying income taxes.

 

[Oddball]

Yep overturn it we need more holes for people to avoid paying income taxes.

Failing to declare income isn't tax avoidance...It's tax evasion.

There little to no evidence that renters not declaring their rental income is widespread...This is just another shameless expansion of bureaucracy.

 

[B. Kidd]

Pencil headed paper pushers multiplying like rabbits. (Does this qualify as 'haiku'?)

 

[Dont Taz Me Bro]

1099 forms are used to track income and esp to create a record of otherwise unreported income.

Yep I heard the same whine the other day at the country store. Apparently most of the rental property owners in my area do not report much of their rental income for taxes.

They do not seem to report hiring illegal immigrants either....

I've always reported my rental income. What they want is for me to bear the burden in forcing other people to report their's, which is not my problem. It's another obstacle in growing and bringing more businesses to this country.

 

[loosecannon]

I've always reported my rental income. What they want is for me to bear the burden in forcing other people to report their's, which is not my problem. It's another obstacle in growing and bringing more businesses to this country.

Correct, but banks already do this, as do most businesses, and auto dealers do, your employer generates forms documenting your income. All they are asking you to do is document money that you pay to contractors with a half page form. It'll take you 3 minutes.

 

[jillian]

1099 forms are used to track income and esp to create a record of otherwise unreported income.

Yep I heard the same whine the other day at the country store. Apparently most of the rental property owners in my area do not report much of their rental income for taxes.

They do not seem to report hiring illegal immigrants either....

I've always reported my rental income. What they want is for me to bear the burden in forcing other people to report their's, which is not my problem. It's another obstacle in growing and bringing more businesses to this country.

ok... i'm not going to say i know a huge amount about tax law... i avoid the subject like the plague and pay an accountant so i don't ever have to think about it...

but.. i'm confused. i've always been under the impression that the person PAYING issues the 1099... how can the recipient of income force the payor to issue a 1099?

i'm confused.

is there an accountant in the house?

 

[loosecannon]

Landlords are being "forced"to document money they pay to contractors who work on their rentals. So your impression is correct.

 

[jillian]

Landlords are being "forced"to document money they pay to contractors who work on their rentals. So your impression is correct.

ohhhhhhhhhhh... to a service provider.. d'uh...

when i read it quickly, it looked like they were going to have to issue the 1099 to the tenant.

i told you, my eyes glaze over when i look at tax. truly. worst grade i got in my entire academic career.

 

[Skull Pilot]

The 1099 was in the past used almost exclusively for contractors or commissioned employees who received more than $600 compensation in a calendar year.

The new regulation requires a 1099 to be sent to any and all people and vendors to whom you've made payments of $600 or more.

So I have to 1099, the telephone company, my gas company, my electric company, all of my vendors, and even the US Post Office.

I' figure that unless the fucking idiots in washington repeal this idiotic regulation that I'll be sending out in excess of 200 1099s.

Now lets all do something that the fucking morons in DC never seem to do and think of the ramifications of this.

One of my vendors is Pfizer, a monstrous company with millions of customers. How do you think they'll handle the millions of 1099s they'll have to process? That's right boys and girls they will hire thousands of people to do it and pass the costs on to their customers who will then pass that cost on to you.

Multiply this by every other company who will have to do the same and you'll see how bad this is going to be.

 

[Quantum Windbag]

1099 forms are used to track income and esp to create a record of otherwise unreported income.

If only it were that simple.

The requirement for rental property owners to file 1099s will mean that they have to issue copies of those forms to everyone, and that those people will also have to file those forms when they file their taxes. And God forbid that they cannot locate someone, or that they fail to file their copy.

Don't worry though, I am sure you will never be audited because you have rental property.

 

[Quantum Windbag]

Yep I heard the same whine the other day at the country store. Apparently most of the rental property owners in my area do not report much of their rental income for taxes.

They do not seem to report hiring illegal immigrants either....

I've always reported my rental income. What they want is for me to bear the burden in forcing other people to report their's, which is not my problem. It's another obstacle in growing and bringing more businesses to this country.

ok... i'm not going to say i know a huge amount about tax law... i avoid the subject like the plague and pay an accountant so i don't ever have to think about it...

but.. i'm confused. i've always been under the impression that the person PAYING issues the 1099... how can the recipient of income force the payor to issue a 1099?

i'm confused.

is there an accountant in the house?

Its the government, it doesn't have to make sense.

 

[asterism]

I've always reported my rental income. What they want is for me to bear the burden in forcing other people to report their's, which is not my problem. It's another obstacle in growing and bringing more businesses to this country.

Correct, but banks already do this, as do most businesses, and auto dealers do, your employer generates forms documenting your income. All they are asking you to do is document money that you pay to contractors with a half page form. It'll take you 3 minutes.

You've apparently never tried to get this information from a painter, handyman or a lawn service. Way more than 3 minutes. Go call up Home Depot and ask for the Tax ID to comply with the law on a carpet install. See how many different answers you get (is it the one doing the install, the one who provides the carpet or the company that actually gets paid?). The law is nebulous here by design, it's more audit traps and audits are nothing but shakedowns.

 

[asterism]

The 1099 was in the past used almost exclusively for contractors or commissioned employees who received more than $600 compensation in a calendar year.

The new regulation requires a 1099 to be sent to any and all people and vendors to whom you've made payments of $600 or more.

So I have to 1099, the telephone company, my gas company, my electric company, all of my vendors, and even the US Post Office.

I' figure that unless the fucking idiots in washington repeal this idiotic regulation that I'll be sending out in excess of 200 1099s.

Now lets all do something that the fucking morons in DC never seem to do and think of the ramifications of this.

One of my vendors is Pfizer, a monstrous company with millions of customers. How do you think they'll handle the millions of 1099s they'll have to process? That's right boys and girls they will hire thousands of people to do it and pass the costs on to their customers who will then pass that cost on to you.

Multiply this by every other company who will have to do the same and you'll see how bad this is going to be.

We issued a 1099 to a Sole Proprietor with a dba using his Tax ID. Sometime between the time I paid him and the end of the year he incorporated under the same name and got a different Tax ID. It took 6 months to resolve the issue with the IRS who claimed it was a fraudulent report.

But let's hear more from folks that have never done this so we can all make our determination about how expert they are at these things.

 

[Skull Pilot]

I've always reported my rental income. What they want is for me to bear the burden in forcing other people to report their's, which is not my problem. It's another obstacle in growing and bringing more businesses to this country.

Correct, but banks already do this, as do most businesses, and auto dealers do, your employer generates forms documenting your income. All they are asking you to do is document money that you pay to contractors with a half page form. It'll take you 3 minutes.

It's not just contractors, it's every company, business, or person to whom you have paid $600 to in a year.

For example, I order supplies from Staples to the tune a several thousand dollars a year. I and every other business who spend $600 at Staples will have to 1099 them.

How many 1099s do you think companies like Staples will receive in a year and how much will it cost to process them?

How much more do you think you'll be charged when you buy something at Staples?