Big 1099 Changes in 2011 for Business Owners and Rental Property
More paperwork...
Beginning in January 2011, if you pay any one person or company more than $600 in a year to provide you with either goods OR services, you’ll need to track that information and issue that person/company a 1099-MISC in 2012. You can thank the Patient Protection and Accountability Act (PPACA) passed in March of 2010 for this new rule.
Under the old rules, you only provided 1099-MISCs to service providers who met the $600+ threshold, and then, only those service providers who operated as a sole proprietor, LLC or LP. You weren’t required to track S and C Corporation providers.
That has now changed, and the tracking requirement applies to everyone … unless specifically exempted by the IRS. So far, it looks as though you’ll have two exemptions to this new rule:
Exceptions for Property Owners
The law provides an exception for those property owners who can show that the requirement will create a hardship for them. We don’t know what that means yet: the IRS has been directed to issue guidance regulations on this topic, but hasn’t yet done so. The law also provides an exemption for individuals who receive rental income of “not more than a minimal amount.†Again, we’re waiting on IRS guidance to know what this means and what the minimal amount threshold will be.
One thing we do know: if you’re in the military or an employee of the intelligence community you’ll be exempt from this requirement, if substantially all your rental income comes from renting your principal residence on a temporary basis.
Assuming nothing happens between now and January 1st, your best option is to plan accordingly, track expenses, and collect W-9s from everyone until the rules are clarified.
Big 1099 Changes in 2011 for Business Owners and Rental Property Owners | Diane Kennedy's USATaxAid
More paperwork...
Beginning in January 2011, if you pay any one person or company more than $600 in a year to provide you with either goods OR services, you’ll need to track that information and issue that person/company a 1099-MISC in 2012. You can thank the Patient Protection and Accountability Act (PPACA) passed in March of 2010 for this new rule.
Under the old rules, you only provided 1099-MISCs to service providers who met the $600+ threshold, and then, only those service providers who operated as a sole proprietor, LLC or LP. You weren’t required to track S and C Corporation providers.
That has now changed, and the tracking requirement applies to everyone … unless specifically exempted by the IRS. So far, it looks as though you’ll have two exemptions to this new rule:
- (a) Payments to tax-exempt goods or service providers, and
- (b) Payments made by credit card, when those payments are captured under new IRS rules concerning payment card and 3rd party Network Information reporting, unless certain conditions apply.
Exceptions for Property Owners
The law provides an exception for those property owners who can show that the requirement will create a hardship for them. We don’t know what that means yet: the IRS has been directed to issue guidance regulations on this topic, but hasn’t yet done so. The law also provides an exemption for individuals who receive rental income of “not more than a minimal amount.†Again, we’re waiting on IRS guidance to know what this means and what the minimal amount threshold will be.
One thing we do know: if you’re in the military or an employee of the intelligence community you’ll be exempt from this requirement, if substantially all your rental income comes from renting your principal residence on a temporary basis.
Assuming nothing happens between now and January 1st, your best option is to plan accordingly, track expenses, and collect W-9s from everyone until the rules are clarified.
Big 1099 Changes in 2011 for Business Owners and Rental Property Owners | Diane Kennedy's USATaxAid
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