1099 Required for Rental Property Work Deduction?

[Joe Kelly]

Hello Bigger Pockets Community! I want some varying opinions about the tax deduction for services work completed on a rental property of mine. I had some subcontractor work for a rental of mine and failed to send a 1099. The subs are giving me are hard time now that I am requesting to meet the Jan 31st due date. The reality of things is there are two different “unsaid” prices for subs, a 1099 price and a non-1099 price. I’ve talked to two CPAs and they’ve stated I definitively can’t take the deduction without the 1099s. However, I have the bill of services and a copy of the check, basically proof, that the services were paid for. Is this enough, can I deduct, do I take the chance of being audited? Thanks

[Eamonn McElroy]

@Joe Kelly

"I’ve talked to two CPAs and they’ve stated I definitively can’t take the deduction without the 1099s."

Ask them to pull the authoritative guidance for that assertion and send it to you...if you actually engaged them.  If you don't have engagements with these CPAs most aren't going to provide free consulting.

[Joe Kelly]

@Eamonn McElroy thanks for the response. One CPA was my old personal accountant the other is one that I am actually engaged with. They sent me the IRS documentation, I’m just not concerned about an audit as I have supporting documentation

[Eamonn McElroy]

Joe -- my point was there is no authoritative guidance that supports the position of your CPAs.

Don't worry about whether failure-to-file a 1099 makes a payment non-deductible.  It doesn't.

Worry about C.Y.A. regarding documenting your W-9 solicitation requests to the IC, filing a 1099 even if you don't have the IC's tax ID, and beginning backup withholding on all future payments.  Your CPA should have had the deep conversation with you here and provided a road map forward.

Best of luck.

[Michael Plaks]

@Joe Kelly

Your CPAs are incorrect. You're allowed to deduct all "ordinary and necessary" business expenses, which labor certainly is. If audited, you have to prove that the payment did happen. 1099s is a separate issue which the IRS might raise in a audit but usually does not.