Rental property 1099misc requirement

[Pacun]

"Regarding 1099 forms, though rental activities are a type of business, it is not required to file 1099 forms.  The IRS tried to make this a requirement a couple of years ago but it was shot down.  If you sent one, no harm, but there is no penalty if you don’t  send it."

 

Is the statement above correct?

Edited February 18, 2015 by Pacun

[kcjenkins]

The law requiring “persons engaged in a trade or business” to satisfy information document reporting requirements when payments are made to service providers in excess of $600 has been with us for many years.  The confusion started in 2010 when Congress added a section to this law dictating that “a person receiving rental income from real estate shall be considered to be engaged in a trade or business of renting property.”  Section 2101 of the Small Business Jobs Act of 2010 (“SBJA”) amending IRC Sec. 6041; P.L. 111-240

 

After additional consideration, the very next year, Congress retracted its position, striking the language defining receipt of rental income as a trade or business.  By passing the Comprehensive Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011

[Lee B]

"Regarding 1099 forms, though rental activities are a type of business, it is not required to file 1099 forms.  The IRS tried to make this a requirement a couple of years ago but it was shot down.  If you sent one, no harm, but there is no penalty if you don’t  send it."

 

Is the statement above correct?

 

The explanation  I have received at several tax seminars that I have attended, is that the way that the IRS

 

reversed course on this requirement has left the question of whether owners of rental property should or

 

should not issue 1099 s somewhat up in the air. People who say that there is no requirement are expressing

 

their personal opinion. The advice that I have received at these classes is go ahead and issue the 1099 s

 

since the current situation is unclear. ( Situation Normal, Right)

Edited February 18, 2015 by cbslee

[kcjenkins]

Since they took the questions off the E on the 2013 form, I think we can safely avoid them unless the client wants to file them.  

[Lee B]

Perhaps you are using a different Schedule E than I am ?

 

All of the Schedule E s that I prepared last year and this year still have the 1099 questions !

[kcjenkins]

oops, you are right, those are still there.   That’s why AICPA, in a letter dated January 17, 2013, called on Acting IRS Commissioner Steven Miller and Chief Counsel William Wilkins to issue clear guidance as to when a taxpayer with rental real estate activity must file Form 1099-Misc.  They further request that Questions A and B be removed from Schedule E.   Guess it's another case of the IRS choosing to ignore Congress.   

 

People who say that there is no requirement are not just "expressing their personal opinion".  They are relying on the Comprehensive Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, passed by Congress.  

 

Sec 3.Repeal of expansion of information reporting requirements for rental property expense payments

(a)In general
Section 6041 of the Internal Revenue Code of 1986 is amended by striking subsection (h).

(b)Effective date
The amendment made by this section shall apply to payments made after December 31, 2010.

Edited February 19, 2015 by kcjenkins
To add emphasis

[Pacun]

So, it is optional. I believe if you run rentals as a business, you have to issue 1099s no matter what.

[TAXMAN]

Does it seem strange then if they strike the line not calling it a trade or business it is allowed in calculation of NOL"s?

[kcjenkins]

Much tax code is strange, sad to say.  AMT, for example.