Guidance re 1099 to contractor

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Guidance re 1099 to contractor

Postby Loon11 » Mon Jul 01, 2013 10:52 pm

I've received such great advise over the past months on a big renovation completed this year on a rental duplex. Our contractor coordinated the work and we paid him in installments. A portion of the work was for repairs and we have separated those costs from the total renovation. So I'm wondering about next yr's 1099s. If we paid him a total of around 100K, but 10K was new appliances, another 10K was repair work. I am confused if I would send him one 1099 for all, or take off the repairs and send a separate 1099 for each repair (a porch repair, and replacing broken boards on a back porch).

The appliances cost around $7200 plus another $3500 for delivery and installation. He paid for them and we paid him - they get depreciated over 5 yrs not 27.5 - should their cost be included in the 1099?
Never had to do a 1099 in the past.
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Re: Guidance re 1099 to contractor

Postby Calm Man » Mon Jul 01, 2013 10:57 pm

I admire your decency in actually going ahead and filing the 1099. If everybody did this a lot of the unreported income would be accounted for and rates might be lower for those of us who are honest taxpayers and/or receive W2 forms or 1099s as a matter of course. (No, I am not implying that all contractors do not report 100% of their income,). That said, you are not filing the 1099 as an accountant being concerned with depreciation schedules or the cost of this or that. it is for what you paid the contractor. The whole thing is the answer, a nice cool round 100K (see edit below). Thank you again for your honesty.

Edit:
The next comment is more like is done in many cases too. I am a consultant and do get 1099s that only reflect consulting fees. Reimbursements for specific items and expense reports are not included. So if you can break things out that way it is acceptable to do that. Just be prepared to show support if you, as the 1099 provider, are audited. (I doubt this happens very much if at all but I don't know.)
Last edited by Calm Man on Tue Jul 02, 2013 12:51 pm, edited 1 time in total.
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Re: Guidance re 1099 to contractor

Postby Rob5TCP » Mon Jul 01, 2013 11:25 pm

When we have setup clients for 1099 vendors they usually fall into one of two categories.

One gives a 1099 for the entire bill(s). It's up to the vendor to show any expenses he had related to his income.

The second is where many of the checks written are for reimbursements (with receipts given).
These would not total on the 1099 (only the total payments less the reimbursements).

Most go with the first option.
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Re: Guidance re 1099 to contractor

Postby deanbrew » Tue Jul 02, 2013 11:07 am

Why are you issuing a 1099?

Not a smart-alec question, but I'm wondering why you would bother with the time and effort? What is the advantage for you? I understand the previous comments suggesting that doing so will ensure that the contractor reports the income, but I've had lots of work completed (both large and small) and never even thought of issuing a 1099.

I'm also curious because I get 1099 forms from some of my clients, but not all of them. What are the legal requirements for issuing 1099 forms?
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson
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Re: Guidance re 1099 to contractor

Postby Loon11 » Tue Jul 02, 2013 12:29 pm

Thanks all. deanbrew - I thought it was law that one had to send a 1099 to anyone who was paid $600 or more for work done. If I don't need to do this, I certainly won't, don't want the headache. Isn't it required by law? Again, if this is something I don't need to do....am not looking for more work than I am anticipating in next yr taxes. would like to know for sure...
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Re: Guidance re 1099 to contractor

Postby Calm Man » Tue Jul 02, 2013 12:53 pm

deanbrew wrote:Why are you issuing a 1099?

Not a smart-alec question, but I'm wondering why you would bother with the time and effort? What is the advantage for you? I understand the previous comments suggesting that doing so will ensure that the contractor reports the income, but I've had lots of work completed (both large and small) and never even thought of issuing a 1099.

I'm also curious because I get 1099 forms from some of my clients, but not all of them. What are the legal requirements for issuing 1099 forms?


Dean, those clients who don't issue you 1099s are worth their weight in gold. No seriously, they are supposed to if over $600. If not, you are still supposed to report it regardless of course.
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Re: Guidance re 1099 to contractor

Postby deanbrew » Tue Jul 02, 2013 1:13 pm

Calm Man wrote:
Dean, those clients who don't issue you 1099s are worth their weight in gold. No seriously, they are supposed to if over $600. If not, you are still supposed to report it regardless of course.


I absolutely report the income. I get all payments by check, so aside from any ethical concerns, there is a paper trail for the income I receive if I or my clients got audited. I only had one client not issue a 1099 last year, but there were five in 2011.

But as a private individual, I never even thought of issuing a 1099. I see in the original post that the OP has a rental duplex. It's hard to tell if he has a business that has to issue 1099s, but I never issued 1099 forms when I was a landlord.
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Re: Guidance re 1099 to contractor

Postby MarkNYC » Tue Jul 02, 2013 1:26 pm

Loon11 wrote:- I thought it was law that one had to send a 1099 to anyone who was paid $600 or more for work done. If I don't need to do this, I certainly won't, don't want the headache. Isn't it required by law? Again, if this is something I don't need to do....am not looking for more work than I am anticipating in next yr taxes. would like to know for sure...

$600 is the threshold amount for being required to issue 1099s to non-corporate payees. The requirement only applies when the payment represents a business expense. So if you pay a contractor $2K to make repairs to a rental property, a 1099 is required, but if you pay the same contractor $3K to make repairs to your personal residence, no 1099 is required because the $3K is a personal (non-business) expense.

On an individual tax return, both Schedule C (sole proprietors) and Schedule E (rental income) now ask the questions: (1)Did you make any payments in 2012 that would require you to file Form(s) 1099? and (2) If "Yes", did you or will you file required Forms 1099?
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Re: Guidance re 1099 to contractor

Postby Loon11 » Wed Jul 03, 2013 4:22 pm

- so even though I am an individual who owns a rental property, I do deduct expenses and should send the contractor a 1099 which I plan to do (I gather from the post I do).
I also had a historical architect who did work on the plans and paid her $800+. Ended up not going with the historical tax credit route (too many rules) but I think I need to send her a 1099 as well.
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Re: Guidance re 1099 to contractor

Postby jared » Wed Jul 03, 2013 4:42 pm

In my opinion, the real question is whether or not you are in the trade or business of renting real property. If yes, you are required to issue 1099s. If not, then you are not required to issue 1099s.

I don't think the answer is clear.
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Re: Guidance re 1099 to contractor

Postby wesleymouch » Wed Jul 03, 2013 4:43 pm

[off topic post deleted by admin alex]
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Re: Guidance re 1099 to contractor

Postby Loon11 » Wed Jul 03, 2013 9:32 pm

Thanks all - I wonder if the IRS publication helps. I own the rental property and believe I qualify for being active in it (>750 hrs) but also work full time in health care. So technically, not in the business of real estate. but probably will do the 1099 unless it becomes very difficult to figure out how to do it.
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