Wednesday, February 9, 2011

NEW LAW: Give your plumber a '1099' form

The IRS needs to know who you are paying.
A new law states that you are required to issue a 1099 form to any handyman or other vendors. If you own, even a single family dwelling as a rental property, starting this year you must track all payments made to anyone, that means, plumbers, electricians, painters, cleaning services, gardeners, landscapers, accountants and handymen, etc. – virtually all services provided to the rental property. 
This is not a new concept for rental properties. Owners of large rental units already must comply. Last year when the government enacted the Small Business Jobs Act of 2010 (H.R. 5297), it expanded this requirement to all property owners. 
However, the minimum for the year is $600 per vendor but it is cumulative before the requirement is triggered. 
For example: if you have a painting job for $500 in May and then in September this same painter does another job for $100, that is a total of $600 so you would be required to provide him with a 1099. But if the job in September only cost $50 totaling $550 for the year, you do not have to provide a 1099. 
How Do You Comply? 
This requirement takes affect for 2011 tax year. You should start tracking all payments made to each vendor of any kind. At the end of the year, calculate all payments to see which total $600 or more.  The IRS is still working on the guidelines and there will be exceptions to this rule. 
So, before you file your taxes be sure you are up to date. Also note there will be penalties for failing to file because your vendor will need your 1099 to file their returns so don't be late. 
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