All Forum Posts by: Bill Briscoe

But if you only own a few houses on the side, and are not in the "business" fulltime:

"Right now, only taxpayers whose real estate activities are considered – for tax purposes – to be a trade or business must issue 1099s. That excludes most of us who own rental properties. Our rental activities have always be treated as engaging in a “passive activity”– not a business. No 1099s required.

Just a side note: The reason for the passive activity treatment is that Congress doesn’t want us to be able to write off rental losses against salaries or other active business income. We can deduct a maximum of $25,000 in passive rental losses against non-passive income and the $25,000 deduction is phased out as a household’s modified adjusted gross income rises from $100,000 to $150,000. But I digress."

from http://www.billonbusiness.net/1099-good-buddy-new-reporting-requirements-for-landlords/

(which seems to have been written before the repeal).

So isn't landlording passive activity IF it is not a full time endeavor?

Because 1099 requirements for landlords was repealed in 2011.

http://tax.cchgroup.com/downloads/files/pdfs/legislation/repeal1099reporting.pdf

Dave T - But what about the landlord exemption? Are you saying its effectively meaningless? Steve Hamilton said in another thread that only certain RE professionals would fall into the trade or business category as landlords but this is not generally the case.

My thought is that if you only file a Schedule E, then you are landlording as an Investment and earning Rents/Royalties. Only flippers or Prop Managers and those who perform a service and have to file a Schedule C are actually operating a "business". Am I missing something here?

Would you also send a 1099 to your local hardware store if it was owned as an LLC and not a C-Corp? Aren't product purchases supposed to be exempt?

I just don't get this. Is tax fraud by everyday Joe's really that rampant? I'm not talking about shortcuts like people reporting real cash costs as expenses that could/should be capitalized, or rounding up the value of their charitable contributions or estimating mileage, or just lumping everything into "supplies" because its easier or other grey areas - but not reporting actual income just because they didn't get a 1099?

Assuming you use a checking account or take payment via credit cards, the IRS can find all that income anyway during an audit unless you were paid in cash and never deposited it anywhere.

I read the repeal of 1099 reporting would "COST" $25 BILLION.

"To pay for the cost of repeal, estimated at approximately $25 billion over 10 years,"

Either they are assuming people will be dishonest just because reporting isn't required, or people really are that dishonest??? And we aren't even talking about the Warren Buffets or the stockbrokers who make 8 figures or more per year, but the small service providers who make their livings a few hundred at a time. How can the missed opportunity tax on that add up to $25B?

Because 1099 requirements for landlords was repealed in 2011.

http://tax.cchgroup.com/downloads/files/pdfs/legislation/repeal1099reporting.pdf

I read that landlords are exempted from issuing 1099s to contractors and laborers. Does that apply to buy and hold rehabbers as well?

With the FNMA's are you talking about HomePath loans? I looked into those and most of the deals were Homepath Construction financing and on those I think they required you to use 3rd party contractors to fix the items on the repair list. Since I'm a DIYer, that doesn't work for me.

Personally I like this one if its only $50-$100 in late fees we are talking about. And make sure they know that all late fees not paid will be deducted from their deposit plus interest.

But make sure you communicate that non-payment/late payment is not acceptable and that you aren't just letting it slide. Otherwise they WILL continue to take advantage of you.

Isn't that because a house needs to be in a "liveable" condition to qualify for conventional mortgages - or else funds to fix major items must be escrowed at closing and then fixed by approved contractors, not DIY by the buyer? At least that I what I was told concerning FNMA HomePath loans...

But isn't a construction loan another good option when the property needs major work? I was able to get one from a small local bank. I'm just not sure how widely available they are nationwide? Does anyone else use construction loans for rehab?