A new law has gone into effect starting this year (2011) in which anyone who has a single or multiple rental units will need to track all vendors that do a minimum of $600 worth of work for you. This is nothing new for large property owners but it now applies to those who have as few as one rental.
There are a few exceptions to the requirement, such as; would gathering the information create a hardship or a burden for you, or the income from the rental doesn’t meet the minimum threshold requirements. Be careful in misinterpreting these exceptions and be sure to speak with your tax advisor before assuming that you do not need to comply with this new law.
Basically if you own a rental you will need to obtain the vendors name, address, social security number or tax identification number and also keep record of the income that you paid them for the year. You will in turn have to issue a 1099 indicating the amount that you paid that vendor and all vendors that did work for you. The new law is called the Small Business Jobs Act of 2010 (H.R. 5297) and it applies to all rental property owners no matter how small; as they are considered to be “conducting a trade or business” and the 1099 reporting requirement now applies to them.
You should already be tracking the payments that you are making to vendors in 2011 as you will need to send the vendor or vendors their 1099 in early 2012. There will no doubt be more guidelines issued by the IRS which is why you should discuss this further with your tax advisor. The requirement applies to all independent contractors who provide services to you and receive a cumulative amount of $600 or more in a calendar year.
As always, I am available to discuss any questions you may have about real estate. If you are interested in buying or selling real estate anywhere in California, I can help you.
Written by:
Mike Southwick
Use only by Permission
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