New rules for 1099 reporting, created by the Small Business Jobs Act, signed into law in September, go into effect at the end of the year. These changes will affect landlords (including situations not normally considered “landlords” such as more than temporary rental of a residence) and will require many who have never needed to file 1099 forms in the past to begin doing so.
Before the passing of the Small Business Jobs Act, all persons engaged in trade or business who made payments of $600 or more in a year were required to file 1099 forms. Full time landlords and property managers had to file, but some who received rental income did not.
Now, beginning for payments received after December 31, 2010, anyone who receives rental income and who makes payments of $600 or more in a year must file 1099 forms with the IRS. All landlords will have to file 1099s for applicable payments, not just those for whom managing property is their business.
1099 forms are used to track the income of private contractors, consultants, and other nonemployees. The payor files the 1099 with both the IRS and the payee. The IRS uses this information to ensure the payee accurately reports their income.
The exceptions to this reporting requirement include temporary rental of a residence; exceptions for the military and employees of intelligence agencies; and exceptions for rental income below a “minimal amount” and hardships to be further determined by IRS regulations, which have not been issued as of November 28th.
The healthcare law passed earlier this year also contains new 1099 reporting requirements. These are more extensive than those affecting landlords, but they do not go into effect until 2012.
For more information on the new 1099 reporting requirements, or for other tax issues, contact the Chicago tax lawyers of Horowitz & Weinstein.