Hiring friends to do work on rentals and taxes

General Landlording & Rental Properties
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Hiring friends to do work on rentals and taxes

Steve S.
Dallas, TX · Member since 2014 · 650 posts · 53 votes

What happens if you don't 1099 them?

If it's under $600 for the year, it's not required right?

Can I still expense it or does that create some issue?

Same question for the people you pay to mow the lawn.  I've asked them where to send the 1099 and gotten no response.  Can I still expense?  What liability do i have?

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Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
8y

1099 any one who is not incorporated to whom you pay more than $600 for the year. It's what is legally required per the IRS. 

Here is some IRS information regarding the penalties for not filing the 1099s. 

https://www.irs.gov/government-entities/federal-state-local-governments/increase-in-information-return-penalties-2

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  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    1099 any one who is not incorporated to whom you pay more than $600 for the year. It's what is legally required per the IRS. 

    Here is some IRS information regarding the penalties for not filing the 1099s. 

    https://www.irs.gov/government-entities/federal-state-local-governments/increase-in-information-return-penalties-2

    Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
    Kolodij Tax & Consulting
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  • Steve S.
    OP
    Dallas, TX · Member since 2014 · 650 posts · 53 votes
    8y
    Originally posted by @Natalie Kolodij:

    1099 any one who is not incorporated to whom you pay more than $600 for the year. It's what is legally required per the IRS. 

    Here is some IRS information regarding the penalties for not filing the 1099s. 

    https://www.irs.gov/government-entities/federal-state-local-governments/increase-in-information-return-penalties-2

     And what about < $600?

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  • Jennifer Rysdam
    Rental Property Investor · Cleveland, MN · Member since 2017 · 518 posts · 354 votes
    8y

    <$600 you are fine. Anything over that needs a 1099 unless they are a corporation. One good practice is that if you know you are going to pay someone more than $600, or you get to that point during the year, make sure to get a W9 filled out by them before paying them. It's much easier than after the fact. I also get them from people who are claiming to corporations. You don't give them a 1099 but having the W9 is proof of what they are claiming in case they are lying. Always better to cover your butt just in case.

    https://www.irs.gov/pub/irs-pdf/fw9.pdf

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  • Steve S.
    OP
    Dallas, TX · Member since 2014 · 650 posts · 53 votes
    8y
    Originally posted by @Jennifer Rysdam:

    <$600 you are fine. Anything over that needs a 1099 unless they are a corporation. One good practice is that if you know you are going to pay someone more than $600, or you get to that point during the year, make sure to get a W9 filled out by them before paying them. It's much easier than after the fact. I also get them from people who are claiming to corporations. You don't give them a 1099 but having the W9 is proof of what they are claiming in case they are lying. Always better to cover your butt just in case.

    https://www.irs.gov/pub/irs-pdf/fw9.pdf

     What if the kid I have mow my the yard refuses?  I’m trying to be by the book here but also realistic

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  • Jennifer Rysdam
    Rental Property Investor · Cleveland, MN · Member since 2017 · 518 posts · 354 votes
    8y

    I don't know. You might have to find a new mower. Either that or ask his parents if you can pay them and 1099 them. Otherwise, hire more than one so that it doesn't get over the $600 mark. Personally, I would hire him and once you get close to $600 tell him that he either needs to fill one out or he can't do any more work for you. Provide him with the documentation to explain the laws. If he's young you might want to also include his parents in the conversation. If he's 15/16+ then it would be no different than him/her filling out paperwork for any other job.

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  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    8y

    @Steve S. - I am just a landlord, not a tax professional. However, I do pay a tax professional (attorney) to give me advice and do my taxes. With that being said, based on what I have been advised for my own situation as a landlord, as well as my own research on the subject, I do NOT have to issue 1099's - even if I pay one of my contractors over $600. Your situation may be different. 

    Many people will advise that you should issue 1099's, but what I wanted to know (and it sounds like you do too), is whether you are required to issue them.  According to my tax attorney, I don't need to issue them because I'm treating my rentals as a "passive activity and not a business". (This is often the case for small landlords.)

    Here's an article from a CPA on this very topic:  Small Landlords Not Required To File Form 1099.

    In the end, I'd suggest getting tax advice specific to your particular situation from an actual tax pro, and then following that advice.

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  • Steve S.
    OP
    Dallas, TX · Member since 2014 · 650 posts · 53 votes
    8y
    Originally posted by @Kyle J.:

    @Steve S. - I am just a landlord, not a tax professional. However, I do pay a tax professional (attorney) to give me advice and do my taxes. With that being said, based on what I have been advised for my own situation as a landlord, as well as my own research on the subject, I do NOT have to issue 1099's - even if I pay one of my contractors over $600. Your situation may be different. 

    Many people will advise that you should issue 1099's, but what I wanted to know (and it sounds like you do too), is whether you are required to issue them.  According to my tax attorney, I don't need to issue them because I'm treating my rentals as a "passive activity and not a business". (This is often the case for small landlords.)

    Here's an article from a CPA on this very topic:  Small Landlords Not Required To File Form 1099.

    In the end, I'd suggest getting tax advice specific to your particular situation from an actual tax pro, and then following that advice.

     Thank you for your thoughts. I have gotten conflicting advice from the professionals so trying to make sure I’m handling things appropriately.  

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    8y

    @Steve S.

    You will get conflicting answers on this topic for sure.

    If you are a trade or business - you are required to provide 1099's to those who you pay more than $600 during a year aslong as they arent a corporation.

    If you are not a trade or business - you are not required to provide 1099's.

    Unfortunately - there is conflicting views whether or not a landlord with few properties is a trade or business.

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