Effective January 1, 2011, property owners who receive rental income will be required to issue Form 1099 to unincorporated service providers for payments of $600 or more during the year. This new requirement is a provision of the Small Business Jobs Act that was passed in November 2010. The American Institute of Certified Public Accountants is lobbying to repeal this provision; however, the efforts have been unsuccessful todate.
The act subjects recipients of rental income from real estate to the same information-reporting requirements as taxpayers engaged in a trade or business. Thus, rental income recipients making payments of $600 or more to aservice provider in the course of earning rental income are required to provide an information return to the IRS and to the service provider. This provision will apply to payments made after Dec. 31, 2010, and will cover, for example, payments made to plumbers, painters or accountants in the course of earning the rental income.
While rental property owners will not actually issue the required 1099s until early 2012, they need to startkeeping adequate records of payments starting in 2011, so they will be prepared to issue correct 1099s. Theywill need to obtain the name, address and taxpayer identification number of the service provider, using FormW-9.
If you have any questions regarding this program, please contact our office at (239) 433-5554. Our team of professionals welcome the opportunity to discuss your business questions. Please visit our website at www.markham-norton.com