Rental Property Owners See 1099 Changes this Year

Although the widely publicized requirement for businesses to report payment to individuals and other businesses for annual payments over $600 per year begin January 1, 2012, owners and managers of rental properties will see changes in the rules this year.

Beginning January 1, 2011, owners and managers of rental property must report total annual payments in excess of $600 for services or products provided during 2011. Prior to January 1, 2011, owners of rental properties were not required to report payments of any amounts.

The provisions affecting rental property owners were included as part of the Small Business Jobs Act passed in September 2010.

How does this affect rental property owners?

If you own rental property of any kind, you need to start collecting the information necessary to make 1099 reporting before you must issue them in January 2012. The easy way for you to do this is to ask vendors who provide services, materials, or equipment to provide you an IRS Form W-9 when you first begin doing business with them this year which provides you the information necessary to accurately file the 1099. Keep this information on file and don’t issue any payments to a vendor until you have the W-9 on file.

If you are a vendor that sells any kind of product or service to owners and managers of rental properties, you should make sure you provide a W-9 form with your first invoice of the year. It is also wise to put your IRS EIN on your invoices when you submit them for payment.

If you operate your business as a sole proprietorship and you have been using your social security number as your company taxpayer identification number, you should request a new Employer Identification Number from the IRS online. It is simple, fast, and lessens the chance of your social security number being available for identity theft.

The IRS lets you request your EIN online and can provide you a PDF copy that can be downloaded within a few minutes of requesting one.

Though there is some momentum to attempt a repeal of the changes to 1099 reporting requirements for other businesses, this one affecting rental property owners is not likely to be challenged in this year’s congress.

Sam Thacker is a partner in Austin Texas based Business Finance Solutions.

Direct email: sam@lesliethacker.com
Twitter: SMBFinance

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