1099 dates are confusing me

[bstaxes]

Is this right?

1099 rental info Jan 2012 get w-9's in 2011

1099 for vendors Jan 2013 get w-9's in 2012

or get w-9's for everybody in 2012 and 1099 to all in Jan 2012

I have read all the info I can find and the wording is driving me nuts. Isn't there a simple version of this. Oh I forgot it is the IRS, what's wrong with me?

Thanks for the help. My focus has been on my medical problems and not 100% on the IRS.

[Lion EA]

Technically, you get the W-9 before you ever make a payment, anytime, so you know what the entity is. And, you can always send Forms 1099-MISC, no penalty for sending them when not required. Now, the new dates for the new requirements have me confused, too! Wouldn't it be nice if the IRS had a chart to sum up the new and continuing requirements? Has any one seen one, from the IRS or a third party?

[TAXBILLY]

Is this right?

1099 rental info Jan 2012 get w-9's in 2011

1099 for vendors Jan 2013 get w-9's in 2012

or get w-9's for everybody in 2012 and 1099 to all in Jan 2012

I have read all the info I can find and the wording is driving me nuts. Isn't there a simple version of this. Oh I forgot it is the IRS, what's wrong with me?

Thanks for the help. My focus has been on my medical problems and not 100% on the IRS.

The 2011 Problem:

http://www.aicpa.org/interestareas/tax/newsandpublications/taxnews/pages/20101111.aspx

The 2012 Problem:

http://www.irs.gov/pub/irs-drop/n-10-51.pdf

Be advised that your clients will balk at having to put their Social Security number on the 1099-MISC they will issue. I am advising my clients to obtain an EIN for their rental property for this purpose. Also be aware that if your client pays by credit card a 1099-MISC will not be necessary, but only in 2011.

If the service or property provider is a corporation no 1099-MISC is required but only in 2011.

taxbilly

[rfassett]

Beginning January 1st, 2011, landlords need to start tracking their 1099 info. These 1099's will be issued in January 2012.

The other issue, with 1099's having to be issued to non-service vendors, the payer needs to start tracking the 1099 info on January 1st, 2012. These 1099's will be issued in January 2013.

The landlord 1099 issue was part of a separate legislation from the vendor 1099 issue. The vendor 1099 issue came about as part of the health care legislation. If that legislation survives then the 1099 issue may survive. The 1099 issue may be pulled out of the law and repealed on its own. It may be modified. Shoot, we may even be speaking a different language by January 1st, 2012. But I believe the landlord 1099 issue is here to stay.

We have mailed a letter to all of our landlord clients informing them of this change. They need to be made aware because their responsibilty for gathering the info begins in just 17 days. Understand the penalty for non-compliance. If the landlord does not get a W-9, the landlord is required to do backup withholding at the 28% rate. If the landlord fails to get a W-9 and fails to do backup withholding, then the landlord will have to pay the 28% on his own. Just to make the waters muddier, if the landlord pays with a credit card, he should not report these payments on a 1099 since the credit card company will be reporting that transaction to the IRS.

Hope that helps!

[MAMalody]

rfaasett, it is possible to see how you composed your letter?

[rfassett]

Here is what we did. (I have attached it, I think, as a pdf.) You will have to adapt it to your needs, market, and client base. Hope that helps!

[MAMalody]

Thanks rfassett. Now I don't have to invent the wheel, just tweek it. Have a great Christmas!

[TAXBILLY]

Beginning January 1st, 2011, landlords need to start tracking their 1099 info. These 1099's will be issued in January 2012.

The other issue, with 1099's having to be issued to non-service vendors, the payer needs to start tracking the 1099 info on January 1st, 2012. These 1099's will be issued in January 2013.

The landlord 1099 issue was part of a separate legislation from the vendor 1099 issue. The vendor 1099 issue came about as part of the health care legislation. If that legislation survives then the 1099 issue may survive. The 1099 issue may be pulled out of the law and repealed on its own. It may be modified. Shoot, we may even be speaking a different language by January 1st, 2012. But I believe the landlord 1099 issue is here to stay.

We have mailed a letter to all of our landlord clients informing them of this change. They need to be made aware because their responsibilty for gathering the info begins in just 17 days. Understand the penalty for non-compliance. If the landlord does not get a W-9, the landlord is required to do backup withholding at the 28% rate. If the landlord fails to get a W-9 and fails to do backup withholding, then the landlord will have to pay the 28% on his own. Just to make the waters muddier, if the landlord pays with a credit card, he should not report these payments on a 1099 since the credit card company will be reporting that transaction to the IRS.

Hope that helps!

Be aware that the 28% rate is in effect until December 31, 2010 but Congress has not decided what the rate will be for 2011.

taxbilly

[rfassett]

Thanks, taxbilly. Yes, I am aware of that.

[bstaxes]

Thanks for helping me get these dates straight and I like your letter.

[Kea]

What about rentals in foreign countries? I have a client that bought a house in Costa Rica that he is renting out. Assuming he pays anyone there more than $600, how does he issue the 1099Misc? The yard boy (or whoever) does not have a US SSN. When I brought this up in the tax update class, the instructors said that since the landlord (my client) is a US citizen, the yard boy's income is now US sourced and would owe taxes on it (assuming he did enough of these to meet the filing requirement).

Another client has a rental house in Mexico (< 100 miles from the US). They use a rental management company. That company would have significant US sourced income (many of the homes and condos are owned by US citizens). But if they start getting 1099s, this could have a major impact on their business decisions. However, the grocery store would also get a lot of US income but not for business purposes. I'm having a hard time believing that these foreign companies (and individuals) would be subject to US taxes just because they have US customers. None of their business takes place in the US.

This could get interesting!

[Lynn EA USTCP in Louisiana]

What about rentals in foreign countries? I have a client that bought a house in Costa Rica that he is renting out. Assuming he pays anyone there more than $600, how does he issue the 1099Misc? The yard boy (or whoever) does not have a US SSN. When I brought this up in the tax update class, the instructors said that since the landlord (my client) is a US citizen, the yard boy's income is now US sourced and would owe taxes on it (assuming he did enough of these to meet the filing requirement).

Another client has a rental house in Mexico (< 100 miles from the US). They use a rental management company. That company would have significant US sourced income (many of the homes and condos are owned by US citizens). But if they start getting 1099s, this could have a major impact on their business decisions. However, the grocery store would also get a lot of US income but not for business purposes. I'm having a hard time believing that these foreign companies (and individuals) would be subject to US taxes just because they have US customers. None of their business takes place in the US.

This could get interesting!

My only understanding of 1099 reporting to NRA doing work OUTSIDE THE US is that they are exempt from 1099 reporting. Currently 1099's are required to be sent only to those doing work within the US. IMO (clearly unresearched) no 1099 would be required for services provided to rental properties located outside the US, so long as those providing the services are NRA and never do any work for the landlord in the US. FWIW.

Lynn Jacobs, EA, FNTPI, NP

Kenner, LA

[Kea]

But would it still be subject to the 30% withholding?

I realize the landlords are US citizens, but this still doesn't seem like US source income to me. The grocery store doesn't pay attention to the citizenship of its customers, why should the yard boy or rental management company?

i had a client in Columbia. Should I check and see if I owe any income tax to Colombia?

[bstaxes]

I was reading rfassett's letter and he is having the client send in the 1099's and the 1096. Can't we efile these? I have efiled 1099's in the past or does the IRS only want paper copies so the post office makes money? The post office will make money on the individual 1099's being mailed. What a rip off from our government.

[rfassett]

I know of no rule AGAINST efiling the 1099's. It is just something that we haven't done. I guess I should look into it. Heretofore, I have despised 1099's, (because I believe they are a waste of time because they only tell a very small portion of the story and the rules have never been fully enforced so "everybody" does not tell the whole truth and nothing but the truth), and I have always let my staff handle them. The accounting staff prepare the 1099's and hand them off to the secretary for processing and mailing. For the most part, I never see the 1099's on this side of the equation. So since you brought it up, let me ask. Can 1099's be batch efiled or does each client have to be efiled separately. With the rules taking effect in January, we will have nearly 400 clients that we will do 1099's for.

[bstaxes]

I only do a few 1099's, so I process them separately. There are members on this board who probably process a lot more than I do, who could answer your question.

[TAXBILLY]

Evidently the 1099 situation for 2011 even confused NATP. Their "You Make The Call" segment in the December 16, 2010 newsletter failed to mention that 1099-MISCs are not required for corporations in 2011 but will be required in 2012. I emailed them and they replied that they were incorrect.

taxbilly