IRS form 1099 has become so universal, the term “1099” has become a shorthand means of referring to contractors. The 1099 form exists to ensure contractors are accurately reporting their incomes to the IRS. Any person conducting a trade or business who makes payments of $600 or more in a year is required to submit a 1099 form to the IRS and to the payee. Right now, individuals who receive rental income but who are not classified as being engaged in property management as a business, do not have to file 1099s.
Starting with payments received after December 31, 2010, however, the rules are changing. As per provisions in the Small Business Jobs Act passed in September, the new rules state that any person who receives rental income must file 1099s for payments of $600 or more.
Professional property managers will be unaffected by the changes. But mom and pop operations, and people who lease property on the side, most of whom have likely not had to file 1099 forms before, will now have to file.
The exceptions to this reporting requirement include temporary rental of a residence; exceptions for the military and employees of intelligence agencies; and exceptions for rental income below a “minimal amount” and hardships to be further determined by IRS regulations, which have not been issued as of November 28th.
To be clear, these new requirements are not the same as those that were part of the Patient Protection and Affordable Care Act. Those are more extensive, but they do not go into effect until 2012.
For more on the new 1099 reporting requirements and how they affect you, or for other tax information, contact Horowitz & Weinstein.