Son as rental manager

[appelman]

A client pays her adult son 1K/month to manage a rental property. (It is partly a training exercise for when she is no longer around.) She will claim it as a management expense and asks whether she should issue him a 1099. My feeling is that while technically she doesn't need to, it might be a wise thing for her to do. Any comments?

[Koss]

1099-misc

What leads you to believe that she does not have to issue a 1099?

Do you feel that it is a personal expense, like if I pay a contractor $2,500 to remodel the kitchen in my principal residence? And that a 1099 is not required because the payment was not made by a business?

Rental property is, in some ways, treated as the operation of a trade or business.

Or is this that issue that Congress backtracked on? I can't keep track of all that crazy stuff...

BMK

[appelman]

The question is...

Exactly what about rentals and 1099's was repealed in 2011?

[Traveling EA]

Is he an employee?

[Roberts]

As a result of the repeal, there is a misconception that landlords do not have a 1099-MISC filing requirement. However, the historical 1099 reporting rules continue unchanged. Furthermore, the increased penalties for failing to file Form 1099 are still applicable.

To clarify, in 2010 The Patient Protection and Affordable Care Act (PPACA) expanded the 1099 reporting requirements to all payments for goods and services from businesses totaling $600 or more to a single vendor, including corporations. The Small Business Jobs Act (SBJA) extended the requirement that landlords, no matter how passive the activity, must issue Forms 1099 to vendors for payments totaling $600 or more beginning in 2011. The SBJA also increased penalties for not filing a 1099.

On April 14, 2011, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 repealed both the expanded Form 1099 information reporting requirements mandated by the PPACA and the 1099 reporting requirements imposed on landlords by the SBJA.

However, under Sec. 6041(a) “All persons engaged in a trade or business and making payment in the course of such trade or business to another person of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income” of $600 or more must report the amount, the name and address of the recipient of such payment.

[appelman]

That's another sticky wicket.

Let's assume not.

[Traveling EA]

Let's assume not.

Then if he is not an employee (but maybe is) your client will not get fines for issuing a 1099 to the son. Then you can honestly check the box that 1099's were issued if required.

[appelman]

I have read that.

As a result of the repeal, there is a misconception that landlords do not have a 1099-MISC filing requirement. However, the historical 1099 reporting rules continue unchanged. Furthermore, the increased penalties for failing to file Form 1099 are still applicable.

To clarify, in 2010 The Patient Protection and Affordable Care Act (PPACA) expanded the 1099 reporting requirements to all payments for goods and services from businesses totaling $600 or more to a single vendor, including corporations. The Small Business Jobs Act (SBJA) extended the requirement that landlords, no matter how passive the activity, must issue Forms 1099 to vendors for payments totaling $600 or more beginning in 2011. The SBJA also increased penalties for not filing a 1099.

On April 14, 2011, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 repealed both the expanded Form 1099 information reporting requirements mandated by the PPACA and the 1099 reporting requirements imposed on landlords by the SBJA.

However, under Sec. 6041(a) “All persons engaged in a trade or business and making payment in the course of such trade or business to another person of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income” of $600 or more must report the amount, the name and address of the recipient of such payment.

In fact, I have read it over and over, and I still do not know exactly what the 2011 repeal is supposed to have changed with regard to the 1099 filing requirement of a rental property owner. (I note that others who have responded to the original posting of the above have made the same observation.) Can anyone enlighten me?

[taxea]

In fact, I have read it over and over, and I still do not know exactly what the 2011 repeal is supposed to have changed with regard to the 1099 filing requirement of a rental property owner. (I note that others who have responded to the original posting of the above have made the same observation.) Can anyone enlighten me?

The issuance of a 1099m by rental owners was repealled. I have found that property managers do issue 1099s to the property owner.

My opinion is that even though it isn't required I issue 1099m to rental managers, independent contractors, gardeners etc.-anyone who is paid 600 in the year for services rendered in relation to the property.

[taxea]

Then if he is not an employee (but maybe is) your client will not get fines for issuing a 1099 to the son. Then you can honestly check the box that 1099's were issued if required.

Unless you have a cite that indicates 1099m cannot be issued unless required I see no reason not to issue whether required or not. These are the people who usually don't report the income on their taxes.

[taxea]

What leads you to believe that she does not have to issue a 1099?

Do you feel that it is a personal expense, like if I pay a contractor $2,500 to remodel the kitchen in my principal residence? And that a 1099 is not required because the payment was not made by a business?

Rental property is, in some ways, treated as the operation of a trade or business.

Or is this that issue that Congress backtracked on? I can't keep track of all that crazy stuff...

BMK

Please correct me if I am wrong but I understood that the IRS does not consider a rental a business unless services are included, such as cleaning, laundry, food delivery or prep, (like things provided in a hotel, motel or inn) or if the owner is a real estate professional and files a Sch C rather than a Sch E.

[taxea]

Exactly what about rentals and 1099's was repealed in 2011?

the requirement to issue them...but, to my knowledge, there is no requirement not to issue them if you choose to. If the son is the property manager then he is either an employee or an IC...I would go for IC because if she doesn't control his hours, direct how he does the job etd.