Written by: NCH
If you’re self-employed, or if you’re paying someone that’s self-employed, you need to be aware of the rules for issuing 1099’s.
The IRS has established guidelines for reporting various income that is not reported on the standard W2 Forms. There are 21 different 1099’s that can be used depending on what needs to be reported to the IRS.
As a real estate investor, you must send a 1099 to anyone you’re paying $600 or more per year, with a few exceptions:
Who do you have to send 1099’s to?
- Individuals
- Partnerships – General Partnerships, Limited Partnerships, LLP, LLLP, PLLC
- Trusts
- Sole Proprietors
Who does NOT need 1099’s?
- Corporations – C-Corps or S-Corps
- LLC’s or Ltd’s taxed as a C-Corp or S-Corp
If the business has “LLC” or “Ltd” you must request a W-9. Remember two important things: you can’t issue a 1099 unless you have a W-9. You can never be penalized for issuing too many W-9’s. You can be penalized for not issuing 1099’s or issuing them late.
Your tax professional can help you determine which 1099 will need to be issued. Most 1099’s are due before January 31st each year. You send one copy to the person you paid, one copy to the IRS, and one copy you keep for your records.
If you are ever uncertain, ask the business or person you’re paying for a W-9. (It’s best practice to ask for a W-9 before you pay someone).
If you’re looking for tax assistance for this upcoming season, book a consult with NCH here: https://www.nchinc.com/adpi
