Question For All My Tax Pro Buddies

6 Replies

I'd like to revisit a back-and-forth, grey-area topic in light of the TCJA and new Section 199A regs... Landlords issuing 1099s.

As we know, the requirement to issue 1099s for landlords who operate rentals that don't rise to the level of trade or business was repealed. Some tax pros prefer to continue issuing 1099s anyway to be on the safe side. In the past, I typically left it up to the client in this instance - I explained both sides of the fence and let them make an informed decision.

Now, we want landlords to be considered a trade or business for purposes of Section 199A, which is a grey area in and of itself with respect to landlords. That said, at the risk of beating a dead horse, it seems to be the general consensus that the 20% QBI deduction will apply to most landlords, as we've already discussed on a few other threads.

My opinion is to issue 1099s wherever possible in the hopes it further solidifies the "trade or business" stamp.

Thoughts??

@Michael Plaks @Natalie Kolodij @Ashish Acharya @Matt Ward @Steven Hamilton II  @Brandon Hall @Daniel Hyman @John Hyre (won't let me tag you for some reason, John) 

@Nicholas Aiola

I always recommended filing 1099s for landlords whenever possible. No downside. However "whenever possible" is the issue. Believe it or not (sarcastically speaking, if not obvious) - investors use day laborers without any documentation and under-the-radar contractors who never file or pay taxes. But if you can get a W-9 out of someone - always do.

Now, what do you do with the "1099 required" box on Sch E is another interesting question.

I've found that, although it is ideal to issue 1099's to contractors, etc. They rarely will want to accept this route. I've had contractors refuse to work if cash/check wasn't the method of payment. 

My default is to treat rentals as a trade or business.  The case law seems favor taxpayers.  So, follow on default then is yes issue 1099s, but as Mike said above, it is very often not acted upon by the client.

Originally posted by @Matt Ward :

We recommend filing the 1099s whenever possible.  That advice is not always acted upon....

As opposed to what advice?  ;)