At our company we’re in the middle of changing our payroll providers.
We did the logical thing and had the new provider start with the new year; however, pesky things like issuing 1099’s for 2013 were dropped into a limbo state. Now, they’re due today (January 31st in case this article is slow to the presses). Can you guess how I’ll be spending the next few hours? This article is for anyone else in a similar situation to me. The first question you have to ask yourself is…
Download Your FREE copy of ‘How to Rent Your House!’
Renting your house is a great way to enter the world of real estate investing, but most first-timers (understandably) have a lot of questions. Fortunately, the experts at BiggerPockets have put together a complimentary guide on ‘How to Rent Your House’. All the skills, tools, and confidence you need to successfully rent your house are just a mouse-click away.
Who Needs a 1099?
The laws change often, but a call into our accountant yielded some general guidelines for 2013. As a rental real estate owner, every person or company you pay for a service, as opposed to a good (there are some nuances, when in doubt err on the side of sending too many), needs a 1099, unless:
- They are a W-2 employee
- They were paid less than $600.00
- They are incorporated.
It’s important to note that a company is only incorporated if they’re a C-Corporation or an S-Corporation. LLC’s don’t count. In today’s world of LLC’s gone wild, this means there are no shortage of companies that need 1099’s. If you’re in doubt, either call them and ask or do a business search with your Secretary of State.
On second thought, don’t go to the Secretary of State because you’ll still have to call the company to get their Federal Identification Number. Which leads to our next question…
What Information Do You Need?
The 1099-MISC form is straightforward. you need is:
- Federal Identification Number (EIN or SSN)
- Amount paid
- (state identification number is optional)
The above list is specific to use real estate folks. If you pay withholding, things get more complicated. However, I don’t thank many people pay withholding for their plumber.
Individually, that’s not much information. In aggregate, it adds up. Maybe your contractor is on vacation…or maybe he’s ducking your calls because you waited until January 31st to get your act together. Either way, you’ve got to ask yourself:
What Happens if You Don’t Have All of the Information?
Missing an address? Missing the Federal Identification Number? Well you have two options:
- Wait until you have all the information. The January 31st, 2014 deadline is to give the 1099’s to your contractors. The IRS receipt cutoff is February 28th.
- Don’t turn in the 1099. If you fail to submit a 1099, it’s a $50 fine per instance.
Under no circumstances should you submit a 1099 with incomplete information. It’s an automatic fine because the IRS doesn’t like the headache.
Wrap It Up: Who needs a 1099?
Please keep in mind, I’m not an accountant and you should always submit all forms to any government agency in a timely manner.
On a related note, I’ve got some contractors to call.