1099 on self directed IRA for a contractor?

Question

I really thought with a bit of love from Google, I could find an answer to this... but I didn't.

In 2012 I created a self direct IRA (no LLC) and had it purchase one condo all in cash.  I hired a contractor to do about $3k worth of work and directed the IRA to pay said contractor that amount.

The contractor just called me to find out if i would be issuing a 1099.  I can't find any form or info on Equity Trust Company's website about how to do this, and what I have found on the interwebs is a bit conflicting.

Anyone out there in BP land with a SDIRA who has paid a contractor and had to answer this question?

-e

Helene R · Answer

I'm assuming you had your IRA do it as a 1 time bill pay so I don't see why you would issue a 1099. 
To be safe you should call and talk to someone at your IRA to get a clear decision on that because there is always a chance the amount would trigger one sent from them. 
I just don't know for sure but don't think paying a bill for rehab would trigger that.

Steven Hamilton II · Answer

Erik Kubec,

Yes, you will simply issue the 1099 to the contractor from the IRA, which yes, will be titled that way or however it was titled when you acquired the EIN number. Being that it is a rental you are not required to issue one; however, I still recommend it as a precaution.

That is precisely why you want to do that.

Helene R,

Do you know what UBIT is?  If Erik were subject to UBIT he would want the expense backed up so that way he can avoid any penalties for failure to issue a 1099 if it was not for a rental.

The benefit is not necessarily that of the IRA, ROTH or Traditional unless you have other expenses. If the IRA was engaged in a flipping business or held notes, it would be liable for issuing a 1098 to those that paid it interest.

-Steven

Helene R · Answer

I understand the $600 threshold which is why I said the amount may automatically trigger a 1099 for the trust co. 
Other then the contractor having to pay taxes on the amount what is the benefit to the  person with a ROTH issuing one?

Erik Kubec · Answer

Thanks @Steven Hamilton II @Hellen_R 
It is a rental.

Can I issue a 1099 on the IRA's behalf by merely putting in their tax ID #, the full name of account:  "Equity Trust Company FBO [my name] traditional IRA" ?

Obviously I don't want it to look (inaccurately) like I personally paid the contractor.

-Erik

Steven Hamilton II · Answer

Erik Kubec,

Is this a rental or was it a flip?  If it was a rental, you are not required to issue 1099's; however, I highly recommend them.

If this was a flip you sure as heck need to:
1. have him fill out a W-9
2. Issue a 1099-MISC to him for non-employee compensation.

Helene R,  whether or not you have to issue a 1099 has nothing to do with 1 time bill pay. It all comes down to the fact that you paid someone over $600.

-Steven

1099 on self directed IRA for a contractor?

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