Tenant asking landlord for W9

General Landlording & Rental Properties
9yFollow

Tenant asking landlord for W9

Lee L.
Investor · Los Angeles, CA · Member since 2014 · 285 posts · 142 votes

One of my tenants is asking me for a W9. Ever since they've moved in, they've been paying their rent in 3 checks: a personal check, a check from their first business, and a check from their second business. This has not been a problem so far. They're great tenants who I intend to keep. They're creative types and do freelance from home for a living.

Are there any reasons why I shouldn't fill this out for them? 

Thanks for the help!!

1Reply
298 views

Most Popular Reply

Nicholas Schommer
Real Estate Investor · Stevens Point, WI · Member since 2016 · 15 posts · 18 votes
9y

If they are freelancers and deducting housing expenses for a "business in the home" situation, they have no need for your TIN, they just need to have accurate records in case they were to get audited (which is accounted for with the use of their business checks to pay for part of the costs). They only reason they would need your TIN is if they are applying for some state credit that requires "documented proof" that they have indeed paid the rent with business funds, but that would be a state specific form and not a W9. I am just skeptical of someone asking for information that they A.) do not need and B.) could do bad things with. This is just my two cents worth, take it for what you will.

5Reply
See this reply in the discussion

40 Replies

Jump to latestLatest
  • Nicholas Schommer
    Real Estate Investor · Stevens Point, WI · Member since 2016 · 15 posts · 18 votes
    9y

    They shouldn't have any need for a W9 form unless they are managing the property and you are giving them housing in return or unless you have some business relationship with them and they are claiming that you are an employee and they have paid you as such. I would request their resoning behind wanting you to fill out a W9 as you are not their employee, nor are they yours (to my knowledge). I guess I am just confused as to why they would need *your* TIN (or your company's TIN)? Unless you are doing a rent-to-own situation and they are claiming mortgage interest on a substitute 1098, perhaps? I wouldn't be giving out that kind of information to tenants for any reason, but that's just my opinion and personal bias from being a professional tax preparation expert for 7+ years...

    2Reply
  • Lee L.
    OP
    Investor · Los Angeles, CA · Member since 2014 · 285 posts · 142 votes
    9y

    @Nicholas Schommer Thanks for the response! I think they're trying to deduct part of their rent from their income for tax purposes. I know they freelance and they work from home and using one of the rooms as a home office. Other than the fact that they will know my TIN and could possibly do bad things with it, do you see any other risks with filling out the form for them? 

    0Reply
  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    @lee 

    @Lee L. I agree with @Nicholas Schommer, they should not be asking you for a W9. There would be no reason why this would even come into play with what you have explained. I have my employees fill out W9s, as well as vendors that do work for me. 

    [email protected]407-448-6679Podcast Guest on Show The Key to Scoring Discounted Deals in One of America’s Hottest Markets
    Compass | St. Pete514 Reviews
    WebsiteView Page
    3Reply
  • Nicholas Schommer
    Real Estate Investor · Stevens Point, WI · Member since 2016 · 15 posts · 18 votes
    9y

    If they are freelancers and deducting housing expenses for a "business in the home" situation, they have no need for your TIN, they just need to have accurate records in case they were to get audited (which is accounted for with the use of their business checks to pay for part of the costs). They only reason they would need your TIN is if they are applying for some state credit that requires "documented proof" that they have indeed paid the rent with business funds, but that would be a state specific form and not a W9. I am just skeptical of someone asking for information that they A.) do not need and B.) could do bad things with. This is just my two cents worth, take it for what you will.

    5Reply
  • David D Painter
    Member since 2016 · 143 posts · 157 votes
    9y

    I see no reason not to give them one.  As a contractor I have to give them out often so I wouldn't really worry about one more. 

    1Reply
  • Nicholas Schommer
    Real Estate Investor · Stevens Point, WI · Member since 2016 · 15 posts · 18 votes
    9y

    @David D Painter, right, you give them out *in the course of doing business*, not just to any joe bob on the street. Have you ever given one to a landlord or requested one from a landlord for any reason? I'm just not to keen on giving someone more information than they need, especially when it sounds like they don't even have any idea why they need the information.

    1Reply
  • David D Painter
    Member since 2016 · 143 posts · 157 votes
    9y

    @Nicholas Schommer  If I thought a tenant was paying all or part of his rent through or for a business I would do it.  There may not be a real need for it but it wouldn't bother me. 

    3Reply
  • Nicholas Schommer
    Real Estate Investor · Stevens Point, WI · Member since 2016 · 15 posts · 18 votes
    9y

    @Lee L. @David D Painter and there you have it! Two different views based on different perspectives, that's what I love about this site! Haha! As long as you're taking proper precautions and monitoring your credit (which you should be doing while investing in real estate anyhow), there is probably not much harm, like David said. I just wouldn't because they don't need it unless they are filling out a 1099, 1098, or other such IRS form required to do their business taxes (which they should then also probably be using a CPA to do their taxes, who would know a W9 isn't necessary to show rental expense). Also, if they ARE filling out one of these forms, there are tax consequences for you as well, but you've already taken all the savvy tax advice available here on biggerpockets.com and have no issue with that, right? Again, just my two cents, YMMV

    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    9y

    You say they need your "tax I'd no." which would imply you are operating as an LLC. I believe deducting rent, just as paying subs, would require a W9 and 1099 when paying an individual, but I believe the W9 is not necessary when paying a Corp or LLC.

    @Steven Hamilton II will know.

    BTW, in Florida the tax I'd no. for an LLC or Corp is shown on the secretary of state's website, so it's no secret.

    1Reply
  • Matthew Olszak
    Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    9y

    As far as I understand, he needs to issue you a 1099-MISC for rent paid in excess of $600 in the course of his business. So if your lease specifies that no commercial activity is to take place on the property, that it's only for residential use, I don't see how he can justify the business expense if he wants to do things by the book.

    However, if you are reporting all of your rental income to the IRS anyway, I don't see the harm.

    3Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    9y

    Hey Tax Gurus, correct me if I'm wrong here, but can't this tenant's business take that W9 form and then turn around and issue @Lee L. here a 1099, which (by default) is going to create income that he must pay taxes on, without all the nifty write-offs that Schedule E provides? @Nicholas Schommer?

    I'm probably paranoid, because home-buyers are constantly doing things (esp tax things) that screw with their ability to get a mortgage, and un-screwing-up those things is a huge part of what I do for a living, but the paranoid part of me is also envisioning a scenario where OP can only put 1/3 of his rental income on Schedule E, and then has to put 2/3 on a Schedule C or something, which in turn is going to potentially screw with OP's ability to get a mortgage (FNMA guidelines treat Schedule E more generously than Schedule C).

    1Reply
  • Matthew Olszak
    Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    9y
    Originally posted by @Chris Mason:

    Hey Tax Gurus, correct me if I'm wrong here, but can't this tenant's business take that W9 form and then turn around and issue @Lee L. here a 1099, which (by default) is going to create income that he must pay taxes on, without all the nifty write-offs that Schedule E provides? @Nicholas Schommer?

    I'm probably paranoid, because home-buyers are constantly doing things (esp tax things) that screw with their ability to get a mortgage, and un-screwing-up those things is a huge part of what I do for a living, but the paranoid part of me is also envisioning a scenario where OP can only put 1/3 of his rental income on Schedule E, and then has to put 2/3 on a Schedule C or something, which in turn is going to potentially screw with OP's ability to get a mortgage (FNMA guidelines treat Schedule E more generously than Schedule C).

     My last 2 year's lease was to a corporation who issued me a 1099-MISC. Box 1 is titled 'Rents', and I entered it as rental income in my taxes, just as I would if they didn't issue me anything. For financing and sale purposes, receiving a 1099 from a renter to me would further solidify that your rent roll is accurate and not cooked. The only time this will be an issue is if you are under-reporting your rental income to the IRS.

    4Reply
  • Nicholas Schommer
    Real Estate Investor · Stevens Point, WI · Member since 2016 · 15 posts · 18 votes
    9y

    Yes, exactly what @Matthew Olszak said, it could all still go on the schedule E in the "rents" column, no need for a separate schedule E or schedule C for a single property. The issue I see, is that they have a "home office" which is one room in the rental unit. I highly doubt that this equals a third of the total square footage of the rental, let alone two-thirds and as such, would not qualify for the businesses to pay two-thirds of the rent... Rent is an easy tax right-off for a business, but when using your home as a business location, different rules apply. Their tax professional would be better to advise them of the specifics of the situation, but they are treading on a thin line reporting things that would not line up with reality. Which is why I would find out the specifics of their situation before filling out the W9.

    1Reply
  • Matthew Olszak
    Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    9y
    Originally posted by @Nicholas Schommer:

    Yes, exactly what @Matthew Olszak said, it could all still go on the schedule E in the "rents" column, no need for a separate schedule E or schedule C for a single property. The issue I see, is that they have a "home office" which is one room in the rental unit. I highly doubt that this equals a third of the total square footage of the rental, let alone two-thirds and as such, would not qualify for the businesses to pay two-thirds of the rent... Rent is an easy tax right-off for a business, but when using your home as a business location, different rules apply. Their tax professional would be better to advise them of the specifics of the situation, but they are treading on a thin line reporting things that would not line up with reality. Which is why I would find out the specifics of their situation before filling out the W9.

    Is this our problem though? The landlord leases to a single person/entity, and receives a single 1099 for those payments. I'd argue its not my responsibility to examine how the 1099 issuer/tenant applies those payments to their own finances, whether its funneled through the corp or on the personal taxes. Just so long as the rent is not being reported twice. It'll be an audit nightmare for the tenant, but I'd imagine the landlord shouldn't have any issues.

    0Reply
  • Nicholas Schommer
    Real Estate Investor · Stevens Point, WI · Member since 2016 · 15 posts · 18 votes
    9y

    The problem would be an almost automatic trigger for an audit of the landlord if the tenant gets audited. I keep spectacular books and records, as do most of my tax clients. However, NONE of them ever want to be audited, nor do I wish to attend one to defend someone else's mistake. Again, not giving people information they don't need covers one's own butt, as well as the other party. 

    3Reply
  • Matthew Olszak
    Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    9y

    @Nicholas Schommer Good point - even if one's books are in order an audit isn't enjoyable (I'd assume).

    0Reply
  • Randall Brown
    Investor · Santa Cruz, CA · Member since 2016 · 71 posts · 39 votes
    9y

    I think if the landlord refuses to give out the tax ID (SS#), then the tenant can still report this as a business expense.

    On the 1099 they will report landlord's name, address etc and check a box "refused to provide tax ID"

    Not sure what the IRS thinks when they see it.

    0Reply
  • Nicholas Schommer
    Real Estate Investor · Stevens Point, WI · Member since 2016 · 15 posts · 18 votes
    9y

    @Randall Brown I would assume it's not a whole lot different in the eyes of the IRS as improperly reported rental expense for business use of a home office, the tenant will be the one in trouble because square footage does matter when running your business out of your home. 

    0Reply
  • Patrick L.
    Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
    9y
    Originally posted by @Chris Mason:

    Hey Tax Gurus, correct me if I'm wrong here, but can't this tenant's business take that W9 form and then turn around and issue @Lee L. here a 1099, which (by default) is going to create income that he must pay taxes on, without all the nifty write-offs that Schedule E provides? @Nicholas Schommer?

    I'm probably paranoid, because home-buyers are constantly doing things (esp tax things) that screw with their ability to get a mortgage, and un-screwing-up those things is a huge part of what I do for a living, but the paranoid part of me is also envisioning a scenario where OP can only put 1/3 of his rental income on Schedule E, and then has to put 2/3 on a Schedule C or something, which in turn is going to potentially screw with OP's ability to get a mortgage (FNMA guidelines treat Schedule E more generously than Schedule C).

     I'm not a tax guru but I get 1099's all the time for my rental business.   Any charity or government entity that pays you more than $600 in rent is going to require a W9 and will issue a 1099.   It's gross rental income on there and you can deduct expenses just as you would on any other rental income, it's not a big deal unless you were planning on under reporting the gross rent received on your taxes.   

    0Reply
  • Nicholas Schommer
    Real Estate Investor · Stevens Point, WI · Member since 2016 · 15 posts · 18 votes
    9y
    Originally posted by @Patrick L.:
    Originally posted by @Chris Mason:

    Hey Tax Gurus, correct me if I'm wrong here, but can't this tenant's business take that W9 form and then turn around and issue @Lee L. here a 1099, which (by default) is going to create income that he must pay taxes on, without all the nifty write-offs that Schedule E provides? @Nicholas Schommer?

    I'm probably paranoid, because home-buyers are constantly doing things (esp tax things) that screw with their ability to get a mortgage, and un-screwing-up those things is a huge part of what I do for a living, but the paranoid part of me is also envisioning a scenario where OP can only put 1/3 of his rental income on Schedule E, and then has to put 2/3 on a Schedule C or something, which in turn is going to potentially screw with OP's ability to get a mortgage (FNMA guidelines treat Schedule E more generously than Schedule C).

     I'm not a tax guru but I get 1099's all the time for my rental business.   Any charity or government entity that pays you more than $600 in rent is going to require a W9 and will issue a 1099.   It's gross rental income on there and you can deduct expenses just as you would on any other rental income, it's not a big deal unless you were planning on under reporting the gross rent received on your taxes.   

     I agree with you in that sense, however, personally I choose to limit my exposure to audit as much as possible and in the example given by OP, they are claiming two thirds of the residential space as "business use" which is likely to trigger an audit based on square footage calculations and the property being classified as residential. If the tenant gets audited, it is likely that the landlord will too as the IRS likes to follow the paper trail. Again, that's just my personal opinion based on audits I have attended and taxes I have done for clients. Each situation is different and everyone makes their own choices, but this is exactly the reason the IRS makes you fill out a 1099 for rents in excess of $600. So there is a paper trail to follow. 

    0Reply
  • Marian Smith
    Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
    9y
    Why not just print out a nice receipt with your name & address etc for total rents revieved 2016 and sign and date it. Say you dont have a W9....in the meantime send off for one and read the instructions. If it seems appropriate and they ask a second time, give them one.
    0Reply
  • Lesley Resnick
    Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    Its just shady.  Either this person does not understand what they are doing or trying to pull a fast one on you you or the IRS.  I would stay clear.

    0Reply
  • Nicholas Schommer
    Real Estate Investor · Stevens Point, WI · Member since 2016 · 15 posts · 18 votes
    9y
    Originally posted by @Account Closed:

    @Nicholas Schommer There are a lot of home base businesses and are there an IRS law that says how many feet a home base business needed?

     No there is not an IRS rule that dictates how many square feet a business is, that would be silly. There is, however, a calculation *based on* the square footage used for business vs that used for residential living quarters and it is a red flag item for audits, especially if you claim more than half of the total for business use and the rental is residential. 

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y

    @Lee L. they should be taking a home office deduction rather than claiming office rent. When you use a portion of your personal residence for your business, that is how you are supposed to claim it on your taxes. In that case, they wouldn't need anything from you. The responsibility falls on them to claim what percentage of their residence is used for business and prove it to the IRS if audited. 

    My position as a landlord would be that I am renting a residential property and how or what they claim as home office is their business. It sounds to me like they are accounting for this wrong. They should not be paying rent from their business. They should pay it from their personal account and then deduct the expense from their taxes. 

    By sending you two checks, they are implying that part of the space is commercial and part is residential. If you send them a W9, you are basically agreeing with them. Lets say the property is 1000 square feet and they have an office that is 200 square feet. If they are paying more than 20% from their business account, then they are over-claiming use of the space. If you agree with them, then in an audit situation, you will get pulled into the audit and probably audited yourself. If they claim home office deduction, it will have nothing to do with you.

    2Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    Tenants do not require a W9 for the purpose of claiming rental payments/business expenses. All that is required is for the landlord to issue a annual receipt for rental income paid/received for the year.  Landlords should be doing this automatically every year to protect themselves.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free