Q - Issuing 1099 forms to Construction Contractors

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Topic Author
atxll
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Joined: Tue Jun 12, 2018 5:20 pm

Q - Issuing 1099 forms to Construction Contractors

Post by atxll »

I purchased a second home/investment property in mid-2022. The home was purchased in my name and the mortgage is in my name. The home was renovated with the help of a few contractors here and there through end of 2022. The renovations and carrying costs were paid personally out of personal accounts for the first several months. The intended use of the home is half second home/half month-month rental property.

In November, once the renovation was finished, I created a single member LLC for the property and moved the deed to the LLC. LLC is a disregarded entity, will be reported on personal tax return. I also setup bank accounts for the LLC and started paying all bills out of the LLC account. The LLC has bookkeeping established and I've contributed all the various personal payment values into the LLC books.

Question I have is, does any one know how 1099 reporting laws apply to this situation? I hired the contractors as a private owner and paid them privately at the time. But then later contributed those expenses/investments to the LLC. I didn't ask for W9s and I doubt the contractors will give them to me now as the culture in that city is very averse to paying taxes.
toddthebod
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Re: Q - Issuing 1099 forms to Construction Contractors

Post by toddthebod »

atxll wrote: Tue Jan 24, 2023 11:08 am Question I have is, does any one know how 1099 reporting laws apply to this situation? I hired the contractors as a private owner and paid them privately at the time. But then later contributed those expenses/investments to the LLC. I didn't ask for W9s and I doubt the contractors will give them to me now as the culture in that city is very averse to paying taxes.
https://www.irs.gov/businesses/small-bu ... ion-return
Not Required to File Information Returns
You are not required to file information return(s) if any of the following situations apply:

You are not engaged in a trade or business.
You are engaged in a trade or business and
the payment was made to another business that is incorporated, but was not for medical or legal services or
the sum of all payments made to the person or unincorporated business is less than $600 in one tax year
Backtests without cash flows are meaningless. Returns without dividends are lies.
Topic Author
atxll
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Re: Q - Issuing 1099 forms to Construction Contractors

Post by atxll »

I guess that is where I am getting tripped up. Is it considered engaged for a trade or business if the payment was made personally prior to creating the LLC?
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MP123
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Re: Q - Issuing 1099 forms to Construction Contractors

Post by MP123 »

atxll wrote: Tue Jan 24, 2023 11:47 am I guess that is where I am getting tripped up. Is it considered engaged for a trade or business if the payment was made personally prior to creating the LLC?
It sounds to me like the payments were made in the course of your trade or business. You were still a business, just not a LLC yet. Or do you not intend to deduct the payments?
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celia
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Re: Q - Issuing 1099 forms to Construction Contractors

Post by celia »

I understand that if you plan to issue a 1099 for work over $600, you need to have the other party fill out a W-9 BEFORE the work is done, to collect their entity name, address, and TIN. Did you do that? Else, how would you know what to put on the 1099?

https://www.investopedia.com/terms/w/w9form.asp
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
Topic Author
atxll
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Re: Q - Issuing 1099 forms to Construction Contractors

Post by atxll »

Yes I do want to deduct them. That makes sense thanks
Topic Author
atxll
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Re: Q - Issuing 1099 forms to Construction Contractors

Post by atxll »

celia wrote: Tue Jan 24, 2023 11:54 am I understand that if you plan to issue a 1099 for work over $600, you need to have the other party fill out a W-9 BEFORE the work is done, to collect their entity name, address, and TIN. Did you do that? Else, how would you know what to put on the 1099?

https://www.investopedia.com/terms/w/w9form.asp
I'm asking them now and hope they provide them! If they refuse it looks like I can file a paper return and put refused in the EIN/SSN box.
MarkNYC
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Re: Q - Issuing 1099 forms to Construction Contractors

Post by MarkNYC »

Don't be sidetracked by the LLC ownership. For you and many others, the LLC is a disregarded entity for tax purposes.

During 2022:

1) How many days was the home used personally?
2) How many days, if any, was the home actually rented?
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