W-9 Request

[Edward]

Client is renting office - he moves in next month at 800.00 per month. He presents W-9 to landlord and landlord asks why? Client responds with "cause I need to send you and the IRS a 1099-Misc at years end. Landlord says he has been leasing offices in other locations for years and has never been asked for the W-9 data. Client then mentions about the 28% backup withholding in the absence of the W-9 data and the landlord becomes furious and says he won't complete the W-9 and will take nothing less than the 800.00 per month. WHAT NOW?

[Edward]

I failed to mention that the Landlord is not a Corporation but an LLC.

[Slappy Tax]

The instructions for 1099-MISC specify to issue a 1099-MISC for each person to whom you have paid at least $600 in rents. So long as the rent payments are being made to a company, I don't see the requirement to issue a 1099-MISC for office space rent.

On a slightly different but related note, the new W-9 (Rev Oct 2007) includes LLC and has a spot for the LLC to indicate its tax classification. This means the landlord could show his LLC tax classification as a corporation and eliminate the need for a 1099. Given the landlord's initial response, I doubt he would go for that.

Another option would be to check the LLC's status on your state's online registry of companies. Here in Florida, each company is listed along with its FEIN, address, etc.

[jainen]

>>he won't complete the W-9 and will take nothing less than the 800.00 per month. WHAT NOW?<<

Now the tenant can decide if he wants to continue to deal with a landlord who obviously hides income from the IRS. It's not like it's hard to find office space to lease these days....

[Slappy Tax]

For me anyway, it's rather tortured leap of imagination to go from the scenario in the original post to "a landlord who obviously hides income from the IRS." All the landlord did is to balk at what he believed to be an unnecessary procedure, and we're ready to convict him of tax fraud.

I know how folks love to cite the Internal Revenue Code, so here it is:

Section 6041:

(a) Payments of $600 or more

All persons engaged in a trade or business and making payment in

the course of such trade or business to another person, of rent...

In the original post, the rent payments are to be made to an LLC, not a person. The lessee doesn't know whether the LLC is a disregarded entity and so should require a 1099. The vehicle for determining this is the new W-9 which allows the responder to specify the type of LLC. Unless it's an LLC being taxed as an individual, no 1099 would be required. (My guess is that a landlord in the business of renting for years is likely not a disregarded LLC and has elected S-Corp status for the LLC, but my speculation is irrelevant.)

Here are the options that I see:

(1) Pay the lease as agreed, forget about the 1099, and butt out of other people's taxes.

(2) Mail the landlord a W-9 to provide him with the opportunity at least to indicate whether the LLC is a disregarded entity and hence should receive a 1099 from the lessee. The landlord will likely ignore the W-9, but the lessee then has a record of having tried.

(3) Obtain the FEIN from the state's registry of corporations/LLCs/etc, and issue a 1099. Just don't expect to get any maintenance work done on your office.

(4) Break the lease and move. Of course, a landlord's failure to provide a W-9 is not grounds to sever a lease, so you'll have to pay the penalties for breaking the lease.

[Hint: The correct answer is Option (1).]

[Edward]

Thanks for your input. I am going to use Option (3) then we'll have some evidence to back up the absence of a 1099-Misc or W-9.

[joanmcq]

Slappy, why would we assume the LLC has elected S-corp status? Don't we all know not to hold real estate in a corp, including a state entity that has no federal standing electing to be treated as a corp?

[Slappy Tax]

Absent the landlord's cooperation on a W-9, I guess we'll never know, will we? But as I pointed out, such speculation is irrelevant to the solutions I proposed.

[Dan]

For me anyway, it's rather tortured leap of imagination to go from the scenario in the original post to "a landlord who obviously hides income from the IRS." All the landlord did is to balk at what he believed to be an unnecessary procedure, and we're ready to convict him of tax fraud.

I know how folks love to cite the Internal Revenue Code, so here it is:

Section 6041:

(a) Payments of $600 or more

All persons engaged in a trade or business and making payment in

the course of such trade or business to another person, of rent...

In the original post, the rent payments are to be made to an LLC, not a person. The lessee doesn't know whether the LLC is a disregarded entity and so should require a 1099. The vehicle for determining this is the new W-9 which allows the responder to specify the type of LLC. Unless it's an LLC being taxed as an individual, no 1099 would be required. (My guess is that a landlord in the business of renting for years is likely not a disregarded LLC and has elected S-Corp status for the LLC, but my speculation is irrelevant.)

Here are the options that I see:

(1) Pay the lease as agreed, forget about the 1099, and butt out of other people's taxes.

(2) Mail the landlord a W-9 to provide him with the opportunity at least to indicate whether the LLC is a disregarded entity and hence should receive a 1099 from the lessee. The landlord will likely ignore the W-9, but the lessee then has a record of having tried.

(3) Obtain the FEIN from the state's registry of corporations/LLCs/etc, and issue a 1099. Just don't expect to get any maintenance work done on your office.

(4) Break the lease and move. Of course, a landlord's failure to provide a W-9 is not grounds to sever a lease, so you'll have to pay the penalties for breaking the lease.

[Hint: The correct answer is Option (1).]

[Dan]

My Question: How do you go about obtaining the FEIN from the state's registry of the LLC's in the State of Kansas? What is the www. etc you would enter to look up something in Kansas. I also have the problem of getting a W-9 from one that has an LLC. Thanks

[Slappy Tax]

I can't say for sure that Kansas offers the registry and FEIN info online, but here's how it works in Florida. You go to the State of Florida Division of Corporation's website (www.sunbiz.org). You then search on the name of the company. If the company has been in business for more than a year, the online data that pops up will show the FEIN.

Here's an example which I picked purely at random:

http://www.sunbiz.org/scripts/cordet.exe?a...es_filing_type=

It shows this LLC's FEIN along with the rest of the company's publicly available information.

You'll need to find the equivalent official website for Kansas. It will probably be easy to find. If not, try going through taxsites.com.

Good luck