Since we have been selling some investment property this year including a number of multi-family properties, this law applies to a larger number of our clients. I thought it was pertinent enough to post here as well. Most importantly, talk to your accountant to make sure you comply.
Here is an article from the National Association of Realtors (NAR) explaining the new law:
New IRS 1099 Requirements for Landlords
Starting in 2011, there are new tax requirements for landlords. All landlords who receive rental income of more than $600 a year from a tenant must file a Form1099 information return for all rental income received and send a copy of the 1099 to the tenant. Landlords must also send a 1099 to all service providers who received payments of $600 or more during the year, such as plumbers, carpenters, yard services, and repair people.
The new requirement applies to owners of both residential and commercial property. The only exception to the new requirements occurs when an owner temporarily rents out his/her primary residence, so long as the owner’s income does not exceed a “minimal” amount to be determined by the IRS. Prior to 2011, this requirement had only applied to those involved in full-time property management, but now the requirement covers all types of landlords. Landlords will need to gather federal tax ID numbers from both their tenants and service providers in order to file the 1099s. Failure to file the 1099s with the IRS can result in fines of $50 per 1099 not filed with the IRS.
NAR (National Association of Realtors) actively opposed this change in the law and is working with others to have this requirement repealed or otherwise modified. Congress took this action in order to assure that income paid to contractors can be verified through a 1099.
