About IRS Form 1099 for Landlords and Investors

Update: The new 1099 form requirements have been delayed until 2024.

The American Rescue Plan of 2021 included a provision to change the requirements for filing a Form 1099. Before the plan you'd only need to file one if you made over $20,000 in aggregate from more than 200 transactions for goods and services. However, the plan altered this reporting standard significantly, setting the threshold at any payment over $600.

Initially, starting January 1, 2023, third-party settlement organizations (TPSOs) were expected to report any network transactions that exceeded $600 through an annual Form 1099-K for payments made in 2022, the IRS has opted to postpone this requirement until 2024.

This means that the original standard of $20,000 and 200 transactions will persist throughout the entirety of 2023.

About Form 1099

Form 1099 is used to report income from self-employment earnings as well as interest and dividends. The party making these payments is actually the one responsible for filing the 1099 form.

For example, as a landlord, if you receive rental payments via an electronic payments processor and they exceed $600 during the year, you should expect to receive a 1099-K form. Additionally, should you make payments for services performed by independent contractors for the purposes of operating your business, you will need to provide them with a 1099-NEC if they cross the threshold.

The IRS relies on these 1099s as a way to monitor miscellaneous income sources that may not be recorded on a traditional W-2 form. By comparing 1099s with reported income, the IRS is able to determine the accuracy of these reported earnings.

1099 Requirements For Rent?

Under the new rules self-managing rental property owners will need to file a Form 1099-K if they accepted credit card or debit card transactions that amount to more than $600 during the tax year.

If a landlord works with an independent contractor for repairs and maintenance, they will need to provide them with a 1099-NEC if they cross the $600 total threshold.

A 1099-Misc is relevant if you collect rent via cash or check.

The 1099 Forms and When They’re Needed

Here are some other situations where you may be required to submit a 1099 form:

Form 1099-MISC

• Owner disbursements sent to your partners totalling more than $600.
• Payments of attorney fees, for tasks such as evictions or the collection of unpaid rent.
• Medical and health care payments made during that tax year.
• Reporting rent collected as cash or checks.

Form 1099-NEC

• You paid an independent contractor such as a plumber, repair person or locksmith.
• COVID-related deep-cleaning.
• Service providers, such as dry cleaning or laundry.

Form 1099-K

• If you use an online credit card processor for rents, such as Stripe or Square.
• If you receive funds through an online payment service platform like PayPal, Zelle, or Venmo.
• If you use a freelancing platform, like Upwork, that manages your client payments.

Can I Refuse To File W-9 Or 1099?

The short answer, no. The IRS requires these forms and there’s no option to refuse or file alternatives. However, there are several exceptions to the rules as they apply to property managers and landlords.

Exceptions To Filing Forms 1099-MISC And 1099-NEC

There are a number of exceptions to having to submit forms 1099-MISC and 1099-NEC. For a full list of exceptions, visit the IRS website.

It is not required if:

• TOTAL payments within the year are less than $600.
• The payment is made to a corporation.
• You will need to confirm if LLCs are taxed as a C or S corporation (you can confirm this with the vendors that you work with).
• The purchase was for goods instead of services.
• Payments of rent to real estate agents or property managers.
• However, the real estate agent or property manager must use Form 1099-MISC to report the rent paid over to the property owner.
• Credit card payments and payments made through online platforms such as PayPal, etc. as these payments are being reported by the card issuers and third-party payment networks (see 1099-K information below).

Use Form W-2 For:

• Wages paid to employees.
• Business travel allowances paid to employees.

About The Changes To 1099 MISC And Reintroduction Of 1099 NEC.

As mentioned above, the changes to the 1099 requirements for landlords have been delayed until 2024. Meaning the original standard of $20,000 and 200 transactions will persist throughout the entirety of 2023. However, for 2024, this threshold will be reduced to $600.

1099 NEC Form

Use the Form 1099 NEC (PDF) to report payments of $600 or more to gig workers, independent contractors, unincorporated service providers, and vendors (individuals or LLCs) that performed work for you related to the rental business. This can include:

• Repairmen
• Plumbers
• Carpenters
• Landscapers
• HVAC professionals
• Locksmiths
• Cleaning services
• COVID-related services such as sanitizing services

Current 1099 NEC Form Design

1099 MISC Form

Form 1099 MISC is to be filed for people or non-incorporated entities that were paid at least $600 in miscellaneous income.

You will file a Form 1099 MISC (PDF) (Miscellaneous Income) for each person in the course of your business to whom you have paid the following during the year:

1. Commercial rents or services (Box 1). For example, payments to rent or lease office space (for commercial properties only), but not payments to real estate agents or property managers.
2. Royalties or broker payments (Box 2). At least $10 in lieu of dividends or tax-exempt interest.
3. Withheld federal income tax (Box 4) regardless of the amount of the payment. Even if the total is $600 or less, you must report ALL backup withholding amounts for anyone for whom you have withheld income taxes under a backup withholding order. If the backup withholding is for a nonemployee, use Form 1099 NEC to report these payments.
4. Attorney fees for legal services, but not for the attorney’s services (Box 10). $600 or more and are not reportable by you in box 1 of Form 1099 NEC. This can be a confusing differentiation. For example, as in a settlement agreement, you would not report the fees paid to the attorney for taking on the case.

What Information Is Needed To File A 1099?

For each individual or entity that you intend to file a 1099 form for, you will need the following information.

• A Tax ID Number (TIN). For individuals, this is their Social Security Number (SSN), for businesses this is their Employer Identification Number (EIN).

• A current address. This allows you to send the recipient a copy for their tax reporting requirements.
• Amount of funds paid. You will need to know or calculate the cumulative amount of money paid to the individual or company over the tax year.

It’s always a good idea to require any vendor that you use to fill out a W-9 when you first engage them with your business. Additionally, it’s best practice to ask for an updated W-9 on an annual basis for all current contractors or vendors. This will help you ensure that you don’t end up scrambling for the information at the end of the tax year and you don’t get caught out by any changes to their business, such as a change of address.

Tip: You can file your 1099s online through the IRS File Electronic Returns Electronically (FIRE) system.

Landlord Studio Supplier Expense Report

With Landlord Studio you can easily calculate how much you paid each of your contractors over the tax year. When recording expenses, assign them to a specific contractor or vendor in the system, then at the end of the year, run our supplier expense report to get a comprehensive breakdown.

Running a report with Landlord Studio takes a matter of moments, select your expense categories, properties, date range, and property owner and hit “Run Report”. We instantly generate the report to be downloaded, printed, or shared with your business partner or accountant via email.

Final words: 1099 for Rent

Tax season can be daunting there are numerous forms to fill out from a Schedule E to your 1099s. Often landlords don’t know when or for whom they need to fill out a Form 1099-NEC or what to do with the Form 1099-K they receive.

As such, it's advised to consult a tax professional, certified personal accountant (CPA), or qualified financial advisor to ensure that you file an accurate tax return and to help you prepare your 1099s.

Related:

• What Is A Rent Ledger And Why Do You Need One?
• Tracking Rental Property Expenses: What Landlords Need To Know
• Should You Use QuickBooks For Rental Properties?
• What Are A Landlords Objectives For Financial Reporting?

Disclaimer: The information in this article is intended to be general informational purposes, not advice. Every portfolio and situation is different, and rules regarding 1099s vary from state to state, as such, make sure you consult an accountant, attorney, tax professional, or financial advisor to ensure you are submitting correctly, as well as maximizing your returns/deductions.