Starting this year, if you own any rental property the IRS is now requiring you to track all vendors doing at least $600 worth of work. By law you are now required to send an IRS 1099 form. This is not new to larger property owners, but the federal government enacted the Small Business Jobs Act of 2010 which now requires all property owners to issue a form..
By being a property owner you are legally obligated to gather certain information from vendors such as their name, address, and Social Security number or other tax identification. You must also keep a record of the amount of each payment made to them over the year.
This requirement applies to independent contractors or freelance workers that commonly provide service to rental real estate such as plumbers, electricians, painters, cleaning services, gardeners, landscapers, accountants, and handymen or any other service providers to the property who provide at least $600 in services and do not receive a W-2 form from you. You need to review your bookkeeping to assure you that you are confident in your system used to track your payments to vendors. In order to review how you paid people (credit card, debit card, check or cash) you need to set up a tracking procedure.
How To Meet These Terms:
These requirements will take effect for 2011 tax year, which means you should have started tracking in January. After the tracking of your payments have been done, in early 2012 you will send your vendors the total in the 1099 form.
Penalties For Filing Late:
The IRS will set important dates for the 2011 tax year. It is important to not be late on filing or failure to file because penalties may be up to $250.
A 30-day extension may be requested for getting forms into the IRS. This will not apply to your deadline for getting forms to your vendors. It is important to remember your vendors must have those forms to prepare their tax returns.
Take note of the filing deadlines and start tracking your payments to vendors OR it is time to hire a property manager! And, I know a great one – Century 21 Brazos Valley Property Management at 979-764-2500