On April 5, 2011, the Senate approved the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011” (“the Act”), which was passed by the House of Representatives in March. The Act retroactively repeals expanded 1099 reporting requirements that were enacted by Congress in 2010.
Before Congress passed the Health Care Bill and the Small Business Jobs Act of 2010, only individuals who were engaged in a trade or business were required to issue a Form 1099 to any service provider to whom the individual paid $600 or more in a calendar year. There were a number of exceptions to this rule, most notably that 1099s did not have to be issued to corporations.
The Health Care Bill, passed in March 2010, added payments for goods in excess of $600 to the 1099 reporting requirements beginning in 2012 (previously, only payments for services had to be reported). The Health Care Bill also required payments to non-tax-exempt corporations to be reported on 1099s.
The Small Business Jobs Act of 2010 (“the SBJA”) treated most individuals receiving rental income from real estate as being engaged in a trade or business for information reporting purposes and for payments after 2010. Before this law, many individuals who owned a rental property were not considered to be engaged in a trade or business. Therefore, the SBJA required rental income recipients who made payments of $600 or more to a service provider (e.g., a painter or plumber) to issue a Form 1099 to the service provider (and the IRS) for the first time. This law greatly expanded the number of rental property owners who would need to issue Forms 1099, and consequently greatly increased the burden of the reporting requirements on rental property owners.
The recently-passed Act effectively returns the 1099 information reporting requirements to the way they were before the 2010 changes mentioned above. Most rental property owners who are not engaged in the trade or business of property rental once again do not need to issue 1099s for payments made to service providers.
If you have any questions related to this article, please feel free to contact our Tax Director, Dale Mason, at dmason@thewolfgroup.com or at 703-502-9500.
This newsletter is for informational purposes only. It should not be construed as tax, legal, or investment advice. Information has been gathered from sources believed to be reliable, but individual situations can vary and you should consult with your investment, accounting and/or tax professional.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE WOLF GROUP TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
