Beginning January 1, 2011, there is a new reporting requirement that will affect all taxpayers who own rental property (including not only companies, but individuals as well). If the rental property owner pays any service provider $600 or more (in the aggregate over the whole calendar year), the owner must furnish the service provider with IRS Form 1099-MISC. This requirement applies to any payments made after December 31, 2010 to such people as accountants, painters, decorators and any others employed during the course of earning the rental income. Unlike under prior law, the new Act extends the definition of service provider to include corporations as well as individuals.
Even though these Forms 1099 will not actually be issued until the beginning of 2012, this is a requirement that rental property owners need to be focused on now. Any payments made over the $600 minimum will need to be tracked, including such information as the name, address, and taxpayer identification number of the service provider so that the correct forms can be issued at a later date. Not only did the new Act impose this new obligation, it also increased the penalties for non-compliance. These changes and the effect they will have on rental property owners will be felt beginning January 1, 2011. If you own rental property, we recommend discussing these changes and how they will impact you in the coming years with us or your other tax planning professional.