UPDATE 2011 – GOOD NEWS!!! THIS WAS REPEALED!!! DISREGARD!! I AM LEAVING IT POSTED SO YOU WILL KNOW IT WAS REPEALED – Best, Kathy 12/05/2011]
11/17/2010
The recently enacted Small Business Jobs Act promises some tax relief for America’s small businesses, but hidden in its recesses is an overlooked item that impacts you, if you have rental property. And it starts as of January 1, 2011 – that is a few weeks from today. Landlords (owners of property) will be required to provide Forms 1099-MISC to service providers for payments of $600 or more during the year. That means payments to plumbers, managers, accountants, handymen etc IF the service provider is a sole proprietor, an LLC or a partnership. You don’t have to provide 1099s to corporations — yet. That is coming next year as an obscure part of the health care reform…good grief.
The American Institute of Certified Public Accountants (AICPA), of which we are a member, shot off a letter yesterday to Congress to request a REPEAL of the parts of the health care legislation and the small business legislation that require the 1099 reporting. Interestingly, Max Baucus (moderate Democrat Senator from Montana), who helped pen the health care legislation, has changed his mind regarding the 1099 provision of the new laws. He went home to Montana and was barraged by small business people complaining about yet more reporting burden—read that: costs both time and money but doesn’t make money = burden on behalf of the government by already stressed small business people. He returned to the Senate and vows to fight for repeal of those parts of the laws. The question is – why didn’t he ask the small business community BEFORE the legislation was passed. Wouldn’t that have been simpler?
At any rate, Congress does not move fast these days (the Republicans are already finding excuses for postponing their first meeting with Obama…come on, guys/gals, get a clue…America wants you to accomplish something!). SO – unless we have some definite progress in the next couple of weeks, it is my suggestion that landlords get ready to comply with this law. It might get repealed retroactively, but, it might not.
Here is what to do:
1. Go online to www.irs.gov and do a search for Form W-9. Print off a few.
2. Before you engage ANY service provider, have him/her fill out the very easy Form W-9, which asks for basic information such as name, address and social security number or federal tax id number (only for partnership or LLC). If the provider whines about this, simply say, hey, it’s the law and if you don’t want to give me this information, I’ll just make arrangements with someone else to do work for me. If the provider is organized as a corporation or is an employee of some big company, you don’t need to get the W-9. If the person is a sole proprietor with a trade name, you must get the person’s actual name and the social security number. The trade name and tax id number will be rejected by IRS – and that will cost you some penalties.
3. Store Forms W-9 securely – you are now holding identities that can be stolen and you can be held accountable. Great. More burden.
4. No later than January 31 of the following year, you must provide Form 1099-MISC to the service provider. Then you must remit the forms with a transmittal (Form 1096) to the Internal Revenue Service by February 28 (if paper) or March 31 (if electronic). So, for work done and paid for in 2011, the 1099-MISC is DUE JANUARY 31, 2012.
5. Ways to get the forms done:
a. Do them yourself on paper forms. You can get forms at any office supply for a chunk of change. You can get them for free from IRS by calling 1-800-829-3676. QuickBooks and Peachtree will print data onto blank forms fed through printer. You can also neatly handwrite them on blank forms. Be sure to put the amount you paid to the service provider in the box called NONEMPLOYEE COMPENSATION.
b. You can have us do them for you.
c. You can try one of the nifty online services like www.efilemyforms.com for a nominal price. (This could be the “best bet” but I’ve never tried it, so I don’t really know.)
Remember that IF this portion of the law is not repealed, and we really hope it will be, rental owners will have to file. If you don’t file, you could be forfeiting deductions and subject to penalty assessments. Stay tuned. Congress is back in session.