In 2011, For Rent By Owners must fill out multiple 1099’s
December 23rd, 2010
In 2011 For Rent By Owners now must fill out Form 1099. This is just another reason why owners should work with a property management company that has vacation rental software.
Barefoot wants to make you all aware of a few changes that will occur in 2011 regarding IRS Form 1099. Up to date anyone that is engaged in a trade or business is required to file a Form 1099 for payments of $600 or more in any year. The business that makes certain expenditures must file a Form 1099 to reflect payments made. The rule is imposed to assure that those who have received payments actually report the income. In the case of real estate, persons engaged in “a trade or business” would include full-time property managers and those whose primary business is property management, and other real estate services.
However, in 2011, any person who receives rental income will have to file a Form 1099 to reflect any payments of $600 or more in a year. This requirement would apply to any landlord, rather than only those who are in the business of managing properties. In 2011 any person who receives any kind of rental income will be responsible to file a Form 1099 for all payments of $600 or more made to service providers, such as plumbers, carpenters, yard services etc. The new requirement applies to both residential and commercial property. Failure to file the 1099 with the IRS can result in an IRS $50 fine per 1099 not filed, and there may be state-by-state ramifications as well.
With this new rule in place, it will be more complicated than ever before to run a VRBO (Vacation Rental By Owner). This new requirement adds to the list of things a VRBO person already has to do and adds another burden.
Professionally managed property management companies have had to file a Form 1099 for years, and know what to do and typically use rental software for this process.
If you have any questions regarding Form 1099, please contact the National Association of Realtors (NAR) on 1-800-874-6500, or visit their website.
Again, current law states that Form 1099 must be filed by businesses only. In 2011 all persons who receive rental payments must provide Form 1099 for payments for services of $600 or more.