Then you need to know that the IRS now requires you to issue 1099’s to any vendors or contractors that you paid $600 or more to this year. Even property owners who are doing this as a part-time business or as a sideline investment activity must comply starting with the 2011 tax year.
To do so, you’ll need to obtain the vendor’s correct name, tax ID number or Social Security number and address. The easiest way to do this is to have the vendor fill out a W-9 form. The types of vendors this applies to include, painters, gardeners, accountants, electricians – pretty much anyone who provides services to you in your capacity as rental property owner. You’ll need to calculate all the payments made to each vendor made in the calendar year to determine if you must send a 1099.
There are penalties for failure to comply with this regulation, so if you haven’t already collected this information from your vendors, do so before the end of the year. It’s a good idea to get these forms every time you contract with someone for services. That way you’ll have the information on hand if the total paid in the year meets or exceeds the $600 threshold. Even if you don’t think you’ll pay someone that much in a year, circumstances may change and if you already have the information on file you don’t have to chase it down at the last minute.
Check out the instructions for filing 1099s and you can order forms for free on the IRS website or buy blank forms in most office supply stores. While there are some exclusions to this policy, the definition of what constitutes of “hardship” or “not more than a minimal amount” are not clearly explained by the IRS as yet, so consult the instructions or with your accountant if you think you might qualify for either of these exclusions.
Using an accounting program such as QuickBooks makes this process easier. It tracks and totals all your vendor payments and you can easily print the 1099 tax forms using the program.