1099 Required?

[Justataxguy]

Landlord had new roof installed on rental property. Is a 1099 required to be issued to the contractor?

[Kram BergGold]

no

1099 forms are not required for Schedule E rentals.

[Roland Slugg]

1099 forms are not required for Schedule E rentals.

Oh, really? Then why is there a Q on Schedule E asking the taxpayer if he filed all required ones.

If the contractor's business is a corporation, then no 1099 is required. If not, then a 1099-MISC is required. See the instructions for forms 1099. They're easily available on the IRS's web site.

[Burke]

I think IRS waived it for Sche E's. They just didn't take the checkbox off the form.

[kathyc2]

There is much disagreement between professionals if 1099's for rentals are required or not. I take the position to be safe and prepare them. However, filing a 1099 now will have a late penalty and you may want to take that into consideration.

[Burke]

This requirement was instituted in 2010 to be eff 1/1/11 (along with the basis requirements for brokers, etc and other things.) However, it was repealed for rental properties (along with the law about purchase of goods) with HR-4, "Comprehensive 1099 Tax Payer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011." The IRS just never took the checkbox off Sche E. Maybe it's appropriate in other circumstances where Sche E is used, but I can't think of any at the moment.

[kathyc2]

This requirement was instituted in 2010 to be eff 1/1/11 (along with the basis requirements for brokers, etc and other things.) However, it was repealed for rental properties (along with the law about purchase of goods) with HR-4, "Comprehensive 1099 Tax Payer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011." The IRS just never took the checkbox off Sche E. Maybe it's appropriate in other circumstances where Sche E is used, but I can't think of any at the moment.

From HR4: "(2) repeal requirements for reporting payments made with respect to rental property which is not part of a trade or business;"

So, is rental property a trade or business or investment? There is no clear cut answer as far as I can tell. I see it as one of those grey areas, so I choose to be on the safe side and file.

[Burke]

Rental properties were determined not to be a trade or business, UNLESS operated as a business under certain circumstances in which case they are on Schedule C's, not E's.

[kathyc2]

Rental properties were determined not to be a trade or business, UNLESS operated as a business under certain circumstances in which case they are on Schedule C's, not E's.

Interesting. I haven't ever ran across anything definitive. Can you link source?

[Burke]

Pub 527 covers the instances when Schedule C is used regarding rental property. Generally, if substantial services are provided or if you are a real estate dealer.

[kathyc2]

I was thinking more of cases that have gone both ways: http://www.nolo.com/legal-encycloped...nvestment.html

IMO there is just not a clear cut answer.

[JohnH]

I think it's pretty clear.
Rental income reported on Schedule E does not carry a filing requirement for 1099's for unincorporated I/C's.
Rental income reported on Schedule C does carry a filing requirement.

But what's the downside to not filing a single 1099 even on the off chance it was required? (which in this case it clearly is not)

$50 at most.

[kathyc2]

I'd say the bigger downside would be the risk of being disallowed in audit, especially if "contractor" is not a full time business but rather someone doing odd jobs and likely not claiming income from it.

I expect we'll see a lot of cases in the coming years if rental income is investment or business. Not because of the 1099 issue, but higher income people will be claiming it's a business in order to avoid the 3.8% investment tax.

[Gretel]

Yes, much disputed issue. Instructions say you have to file of your are in the business of renting - whatever that means. I don't think it's just for Schedule C filers (in regards to rentals) they need to file them no matter what business they are operating. I believe this also includes a real estate professional who files schedule E's.