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Landlords could take a hit from Obamacare

muleman

Gone But Not Forgotten
Will Rental Property Owners Have to Fill Out 1099s?

While many of us are still scratching our heads as to how the innocuous-sounding Patient Protection and Affordable Care Act (a.k.a., ObamaCare) was passed, Congress is trying to add yet more layers of bureaucracy that will separate us from our freedom and our money. Congress has handed Barack Obama the Small Business Jobs and Credit Act, which expands the reporting requirements on IRS form 1099 to include individuals who own rental property. Currently, ObamaCare mandates that small businesses file a 1099-MISC for goods valued at over $600. Under the new bill, property owners would be considered to be "engaging in business" and as such would be required to report any goods or services -- valued at over $600 in a 12-month period -- associated with the property.
This may sound simple, but for the 10 million Americans affected, it will be anything but. Ryan Ellis of Americans for Taxpayer Reform illustrated it perfectly: "So imagine that you're renting out your starter condo. You pay a property manager, a plumber, a repairman, a locksmith, a condo association, etc. Imagine having to get a taxpayer identification number, order 1099-MISCs from the IRS, fill them out by hand, keep a copy for yourself, send a copy to each payee (from whom you had to get a tax ID number and other information), and then finally take your legitimate rental deduction. Then the IRS finds some hiccup somewhere, and you get audited -- all to placate an insane Congress."
 
"So imagine that you're renting out your starter condo. You pay a property manager, a plumber, a repairman, a locksmith, a condo association, etc. Imagine having to get a taxpayer identification number, order 1099-MISCs from the IRS, fill them out by hand, keep a copy for yourself, send a copy to each payee (from whom you had to get a tax ID number and other information), and then finally take your legitimate rental deduction. Then the IRS finds some hiccup somewhere, and you get audited -- all to placate an insane Congress."

Honestly this is exactly what I see happening and my accountant has warned me about this too. I have a handyman that I use for misc repairs on some of my property, at my stores, etc. Nice guy, known him for years, some years he may earn $50 from work I throw at him, other years he may earn $1500. Just depends. The accountant said to either formalize his employment or pay him cash and don't claim the expenses, even though they are legitimate expenses. On a small pay out year the accounting fees will exceed the legitimate tax deduction.
 
Honestly this is exactly what I see happening and my accountant has warned me about this too. I have a handyman that I use for misc repairs on some of my property, at my stores, etc. Nice guy, known him for years, some years he may earn $50 from work I throw at him, other years he may earn $1500. Just depends. The accountant said to either formalize his employment or pay him cash and don't claim the expenses, even though they are legitimate expenses. On a small pay out year the accounting fees will exceed the legitimate tax deduction.
This should not be a problem for you until you hit the $600 threshold. I get a handful of 1099-Misc from some customers each year from the work I do for them. On the years I do less than $600 in work I don't get a form. I complete a 1099-Misc for day labor that I use if I pay them more than $600 in a calendar year so I can write it off. If I'm not mistaken, this has been around for some time for businesses, but the umbrella has widened to include people who profit from income property and choose to write off their expenses. Even still, the guy who lives in a double and rents out the other suite, is probably not going to incur $600 of expense from his locksmith or electrician or plumber, without getting a receipt from them so he can write it off as expense or depreciate it over time. The way I understand this, the landlord now has to provide the 1099-MISC to the individual contractor ONLY if the expense is $600 or more, primarily to insure that the contractor declare the income, and the gubmit extract their pound of flesh. Am I missing something other than Congress adding another tracking mechanism to make sure they get every nickle from everybody so their coffers remain full to squander and waste?
 
This should not be a problem for you until you hit the $600 threshold. . .
True, but with multiple properties and multiple small vendors from handymen to locksmiths and multiple checking accounts it can become a big pain in the neck. $600 is a pretty low threshold before the paperwork starts. And all of a sudden it could go from minimal paperwork to filing all sorts of papers for each property for each handyman, electrician, plumber, etc etc etc
 
This should not be a problem for you until you hit the $600 threshold. I get a handful of 1099-Misc from some customers each year from the work I do for them. On the years I do less than $600 in work I don't get a form. I complete a 1099-Misc for day labor that I use if I pay them more than $600 in a calendar year so I can write it off. If I'm not mistaken, this has been around for some time for businesses, but the umbrella has widened to include people who profit from income property and choose to write off their expenses. Even still, the guy who lives in a double and rents out the other suite, is probably not going to incur $600 of expense from his locksmith or electrician or plumber, without getting a receipt from them so he can write it off as expense or depreciate it over time. The way I understand this, the landlord now has to provide the 1099-MISC to the individual contractor ONLY if the expense is $600 or more, primarily to insure that the contractor declare the income, and the gubmit extract their pound of flesh. Am I missing something other than Congress adding another tracking mechanism to make sure they get every nickle from everybody so their coffers remain full to squander and waste?
JEV, the difference here is that this used to be for labor. Now, it is for any goods or service received in a year. If you buy diesel fuel for a truck and spend more than 600.00 in one year with the same company(not station) you will have to fill out a 1099. If your company buys more than 600.00 misc parts from a hardware store or parts store, same-same. It is no longer restricted to contract work or day labor.
 
OK, I see that GOODS are also covered. That being said, I think that rule was created by a moron lobbyist who sells paper to the gubmit, and passed by moron politicians who want to add yet another layer of accounting that will create more gubmit jobs to track this lunacy. Goods are already tracked and declared by the seller as income, and by the consumer as expense including appropriate taxes. WTF is with these ass holes? Can some of this stupidity be reversed when the next set of thieves takes over?
 
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