Landlords: 1099 or not to 1099?

March 7, 2013

Now that the deadline for those filing their taxes electronically is approaching – those filling on paper should have already mailed the forms in by now – employees may be sitting down to complete the dreaded files. But for freelancers and contractors, as well as those that employ them, this is often a bit more complicated. In particular, landlords are often torn between what is considered personal or business payments. Fortunately, one tax expert explains the difference.

A question on the Schedule E tax form asks "Did you make any payments that would require you to file Form(s) 1099?" As an article in andlords-be-filing-1099s-for-service-providers/” target=”_blank”>Forbes explains, "The perplexing element is not whether the landlord made payments to service providers of more than $600, but whether the activity of renting real property to others is a trade or business." 

In general, if a landlord hires someone, a cleaner, a gardener, or even an attorney for legal fees, that is strictly to improve the property that is rented out, this should be reported on a 1099 form if it exceeds more than $600. If someone is hired, even if it is the same person, for personal gain, this does not need to be reported. 

In the past few years, the language regarding these payments has changed, but the idea is the same: if payments are related to a trade or business, they must be reported. 

Since the penalties have increased in the past year for late reporting, from $50 to $100 per 1099 form, keeping track of these payments and using 1099 processing services are more important than ever.

Tab Service Company is a leading provider of 1099 processing services. As an SOC2-approved service organization, we apply industry-best practices to our approach with clients.