Jan 14, 2011
Taxes down, reporting up for rental owners
14 Jan 2011
Posted by Andrew Kantor
If you’re a small-business owner, there’s a lot to like in the Small Business Lending Funds Act that passed last year: Eight separate tax cuts totaling about $12 billion for one thing, plus $30 billion being made available for small banks to lend to small businesses.
The law is "revenue-neutral," meaning that whatever the law costs is made up for by the savings or income it creates.
In the case of the Small Business Lending Funds Act, one way the government is offsetting the cost is by making sure that contractors — plumbers, landscapers, accountants, etc. — don’t hide income. Caesar wants what’s coming to him, in other words.
And one way the IRS is doing that is by requiring just about anyone who makes money by renting property to document (via the good ol’ 1099-MISC form) when they pay $600 or more to a contractor during a year. Starting now.
Someone who owns dozens of properties with dozens of contractors doing hundreds of jobs over the year — well, he’s going to have a bit more paperwork than the landlord who owns one or two rentals. (Of course, the landlord with lots of property probably has accounting software that can handle the reporting without batting a virtual eyelash.)
There are some exceptions to the requirements, but check with the IRS if you think any apply to you. (In other words, don’t get your tax advice from a blog.)
Individuals renting their principal residences — think active members of the military and intelligence community — are exempt. So, too, are individuals who can show that the extra paperwork will be a hardship. (How you can do that isn’t clear yet.) And ditto for anyone who receives a "minimal amount" of rental income — e.g., charging that 24-year-old slacker son of yours rent.
Is it a big deal? Not really — at least, assuming you (Mr. Landlord) keep accurate records. There are some mighty hefty fines if you don’t report your payments.
Still, the money raised (expected to be about $2.5 billion over 10 years) will help offset the cost of helping small businesses, many of which can use all the help they can get.