Rental Property Owners Get Relief from 1099 Reporting Requirements

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by Thomas F. Scanlon, CPA, CFP®

Originally under the Small Business Jobs Act, those who received rental income from real estate were going to be considered to be engaged in a business, and were going to be subject to the requirements to issue 1099 information returns.

This act was going to make owners of rental properties report payments totaling $600 or more during the course of the year for any expenses relating to these properties.

The provision required even the smallest property owners ” those who might just be renting out a second home or other rental property ” to track any work done for them that totals $600 a year or more over the course of a year and to send any vendors whose work reaches that amount an IRS Form 1099, so they can report the income to the federal government. Examples of possible 1099-MISC recipients would include: gardeners, landscapers, contractors, property managers and repair services.

When the provision was included in the small business bill, realtors were among the first opponents of it, and worked to ensure that Congress understood the provision was an example of over-reach that would burden mom and pop property owners with extensive record keeping and paperwork.

Members of Congress and President Obama got the message and, in a rare example of agreement between Republicans, and Democrats, lawmakers agreed the provision needed to come out.

This expanded requirement for Rental Property Owners was repealed in May of 2011.

The 2011 Instructions for completing Form 1099-MISC, currently published still include paragraphs for this requirement. Therefore when completing 1099s for 2011 the following paragraphs should be disregarded:

Treatment of rental property expense payments under Whats New on page 1.

The second paragraph under Trade or Business reporting only on page 1.

Rental Property Expense payments on page 3.

Action Plan: If you own rental property, breathe a sigh of relief.

Thomas F. Scanlon, CPA, CFP® is with Borgida & Company, P.C., Certified Public Accountants in Manchester, Connecticut, celebrating 44 years of tax, advisory and accounting services. Call 860.646.2465 for more.

See 7 Things Every Taxpayer Should Know.

American Apartment Owners Association offers discounts on products and services for landlords related to your rental housing investment, including rental forms, tenant debt collection, tenant background checks, insurance and financing. Find out more at www.joinaaoa.org.