Question: does a landlord need to issue 1099s to contractors who perform work on the landlord’s property?
Answer: I give a CPE presentation on Form 1099, and I’ve also done far more research into 1099s (especially 1099-MISC) than any sane person should. And I can say, I have an opinion on the answer to this question (I used to say “no,” and now I believe it’s “yes”) but really, it’s a gray area.
Basic Setup
The Affordable Care Act originally included a provision that said owners of rental properties needed to issue 1099s. The public reaction to this was — shall we say — negative, and so Congress repealed this provision before it ever took effect.
This was hailed as a “victory for landlords everywhere.” But was it?? As we will discuss in Part 5, I don’t think the ACA was really changing what people thought it was changing, and the repeal of that provision may not have been the “victory” people thought it was.
Section 6041, which covers the requirement to issue Form 1099-MISC, says “trades or businesses” must issue 1099s. That seems to close the door on rental properties, right? But not so fast on that!
Some people — mostly CPAs in online discussions — say emphatically and definitively, that “only” landlords who meet the “real estate professional” test need to issue 1099s. This is an interesting potential “out,” but it’s not the “no-doubter” these CPAs are making it out to be.
The fact is, we don’t really know the answer, but we can make some educated guesses here. Get ready to have your head start spinning round and round, starting in part 2!
Links to Other Parts in This Series
- Part 2 (What is a Trade or Business?)
- Part 3 (Net Investment Income Tax Regs)
- Part 4 (Cautions About Relying on NIIT Regs for 1099 Purposes)
- Part 5 (Miscellaneous Discussion: What Was the ACA Really Changing; How to Proceed)
- Part 6 (Why Isn’t There a Clear Answer on This?)