Rents / Form 1099MISC

[Burke]

Please clarify (since the IRS instructions do not) what figure goes in Box 1 for rents when the entity collecting the rents for a vacation condo owner subtracts certain items before remitting the check to said owner. I have a client who receives a 1099Misc for "Rents" which shows the NET amount after commissions, cleaning charges and credit card fees, but BEFORE maintenance charges and utilities, all of which are deducted from the rent check. Every year we have to get a worksheet to determine how they came up with this figure. This year, they included the Dec rents even though the check was not drawn or sent to client until January.

[ChEAr$]

rents

Please clarify (since the IRS instructions do not) what figure goes in Box 1 for rents when the entity collecting the rents for a vacation condo owner subtracts certain items before remitting the check to said owner. I have a client who receives a 1099Misc for "Rents" which shows the NET amount after commissions, cleaning charges and credit card fees, but BEFORE maintenance charges and utilities, all of which are deducted from the rent check. Every year we have to get a worksheet to determine how they came up with this figure. This year, they included the Dec rents even though the check was not drawn or sent to client until January.

should be reported in gross on schedule e, no matter what the 1099misc incorrectly
states.

As for the last income item, the collector is agent for the owner and therefore when he
collects the rent its same as when owner collects it; hence income properly reportable
in that earlier year.

[Burke]

Thanks for the clarification on the Dec rent. I have been reporting the gross rents on Sche E with the appropriate deductions and more or less disregarding the 1099 figures. It's not a problem since they are reporting less than what I put on the tax return. However, I tried to find something in writing somewhere about how to do the 1099Misc correctly to educate them, but was unable to locate anything. The instructions for this form simply say "Enter amounts of $600 or more for all types of rents...." So I am assuming it should be gross rents.

[Corduroy Frog]

Bursership requirements

I would like to carry the conversation further, and offer that the IRS expects the PAYER to issue the 1099 for the amounts actually paid.

Contractor needs to pay a roofer $1000 for services rendered. Contractor doesn't have
his checkbook but a close friend, the paver, has a check and pays the roofer $1000.
Couple days later, contractor repays the paver $1000 and all is well.

Which, if any, of these conclusions is correct? (For all I know there may be more than one)
1. Contractor cannot give the roofer a 1099 because he is not the party who paid.
2. Contractor must give the paver a 1099 for $1000 since he paid in the order of business.
3. Paver must give the roofer a 1099 for $1000, since he is actually the disburser.
4. Contractor must give the roofer a 1099 for $1000.

Obviously, there is one answer that makes sense to everyone, but the question is which of the above fulfills the IRS requirement for issuing a 1099, and never mind whether it makes sense.

[Corduroy Frog]

Bursership requirements II

Similar search for the IRS requirements, but this is different situation.

Landlord uses a management agent to collect rent. During the course of the year, the agent collects $9000 in rent, and withholds $900 for his own fee. Which, if any, of these are correct treatment? (There may be multiple answers, if they are not mutually exclusive)

1) Agent issues landlord a 1099 for $8100 because that is the amount of the payment.
2) Landlord issues agent a 1099 for $900 even though no payment was made to him, because agent will escape information returns if this isn't done.
3) Agent issues landlord a 1099 for $9000 because that is the amount of rent paid.

Again, this is not about who claims what on their Schedule E, C or 1040, but how each party meets their obligation to issue a 1099 and for how much.

[kaimana]

The correct answer is....every business that pays out $600. or more is required to issue a 1099 for the gross amount paid.
If the management company collects 9000. in rent and keeps their percentage, they issue a 1099 for the entire 9000. because it is the receipient of the 1099 that then expenses the management fee and other expenses on his return.
For all you other scenarios if 600. or more is paid out by a business entity a 1099 for the gross is issued to the payee.

[Nashville]

Instructions for 1099-MISC

are not that straightforward. See instructions to nominees.

[Burke]

2) Landlord issues agent a 1099 for $900 even though no payment was made to him, because agent will escape information returns if this isn't done.

Huh? Sorry, don't understand the explanation.

[Gretel]

It makes sense to me.

If everything would be done the "cash" way, management company would issue check to client for full amount and report full amount on 1099.

Then client would turn around and pay management company $900 for their services and issue 1099 for that amount.

Should reporting requirement change just because cash wasn't exchanged? I think this is a good question.

[S T]

Property Managers

All detailed property manager reports I have seen, show gross income, less property management fee, less repairs paid, then net check to Owner.

I have one client that has a single rental out of state, and we issue a 1099 to the Property Manager for his fees. However, the Property Manager never issues a 1099 to the owner for gross rents.

I can understand the reports, however, maybe the property managers do not understand the 1099 reporting to the owner.

I believe the property manager should issue 1099 to owner for gross rents, then owner issues 1099 to property manager for their fee and any other 1099 forms necessary or as appropriate to the vendors supplying labor and materials.

I am sure we all agree this not the way most of the reporting is being submitted.

Sandy

[Gretel]

Maybe this question shows how ignorant I am.

I thought only businesses have to follow 1099 reporting requirements. Why would a owner of a rental report the management fees on a 1099 unless owner is a business and not just a property owner?

[JG EA]

You are correct. They are considering changing this, but for now it is absolutely not required.