In 2010 President Obama signed into law the Small Business Jobs Act, one of the most significant pieces of small business legislation in the past decade. Among the superstar provisions within the law are more than $12 billion in SBA lending support, availability to higher loan limits and expanded business training and counseling, among others. While business owners may be aware of the new 1099 requirements, one provision that hasn’t received a lot of press, but is extremely significant for many rental property owners, is the law which requires landlords to issue 1099 forms to service provides for all payments above $600.
If you own a rental property, the new law requires that you keep detailed information about your service providers such as person/corporation name, address, SSN and EINs. The law extends to services provided by electricians, painters, landscapers, plumbers and other service providers – even accountants. This isn’t a change for seasoned real estate investors or developers, but it is significant for mom and pop landlords who own one or two rental properties.
The new legislation hopes to ensure that vendors and contractors report all taxable income to the IRS and is expected to raise more than $2.5 billion in the next 10 years. The provision only applies to payments made after Dec. 31, 2010, and rental property owners will not issue the required 1099s until early 2012, though you need to start keeping adequate records now. The IRS may not qualify certain deductions for property improvements or repairs if the homeowner chooses not to properly document 1099 information.
If you have any questions regarding this provision, who should receive 1099s or on how to record this information, please contact Wendroff CPA Senior Accountant Aubrey Burkett-Erice at 703-553-1099 or this email.
For more information on the Small Business Jobs Act or other tax strategies, please contact Wendroff & Associates, LLC at 703-553-1099. Also, please look out for our upcoming Asset Protection for High Net Worth Individuals seminar this February. For more information, please click here.