Landlords who receive rental income from tenants must start reporting payments made to vendors which exceed $600 a year. In July 2010 Congress enacted Small Business Jobs Act which was designed to encourage small business spending. However, the Act contained one provision that may have escaped the notice of taxpayers who own rental property, but will affect them starting in January 2011. Under the provisions of the Act, owners of property who receive rental income will be required to issue Forms 1099 to service providers for payments of $600 or more during the year. The Act requires recipients of rental income from real estate to the same information-reporting requirements as taxpayers engaged in a trade or business. Thus, rental income recipients making payments of $600 or more to a service provider such as a plumber, painter or accountant must provide an information return (typically, Form 1099-MISC, Miscellaneous Income) to the IRS and to the service provider. This rule goes into effect for all payments by landlords to vendors made after Dec. 31, 2010. There is an exception for individuals renting their principal residences, including active members of the military, from the reporting requirements. While the duty to report will not start until 2012, landlords must start keeping records of payments starting Jan. 1, 2011, so they will be prepared to issue correct 1099s. Landlords will need to obtain the name, address and taxpayer identification number of the service provider, using Form W-9 or a similar form.
Mark Tucker has been practicing law for almost 20 years with an emphasis on Justice Court and Superior Court litigation, collection and real property issues.