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Ed Bonaski, Sherwood Systems

New Rules Require Rental Property Owners to Issue 1099s Starting With the Tax Year 2011.


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New reporting requirement for rental property expense payments.   If you receive rental income from real estate, you may be required to report payments you made for rental property expenses. You will use Form 1099-MISC, Miscellaneous Income, to report these payments. For more details including exceptions, see the Instructions for Form 1099-MISC and www.irs.gov/form1099misc.

The recently enacted Small Business Jobs Act contained one provision that may have escaped the notice of taxpayers who own rental property, but it will affect them.  Under the provision, 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 subjects 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 while earning rental income are required to provide an information return such as a Form 1099-MISC to the IRS and to the service provider. This provision will apply to payments made after Dec. 31, 2010, and will cover, for example, payments made to  Electricians, plumbers, and any other professionals while they are earning the rental income. 

While rental property owners will not actually issue the required 1099s until early 2012, they need to start keeping adequate records of payments starting Jan. 1, 2011, so they will be prepared to issue correct 1099s. They will also need to obtain the name, address, and taxpayer identification number of the service provider, using Form W-9 or a similar form. 

Microsoft Dynamics –GP can help you get organized and help you make this reporting requirement run smoothly next January.

If your organization is located in the Arizona or New Mexico area, contact Sherwood Systems for assistance in determining if a technology solution can help your organization better serve your business needs. (877) 943-9696

By Sherwood Systems – Arizona Microsoft Dynamics GP Partner

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