{"id":461,"date":"2020-11-30T00:35:01","date_gmt":"2020-11-30T00:35:01","guid":{"rendered":"http:\/\/cpabellingham.com\/blog\/?p=461"},"modified":"2020-12-01T00:42:16","modified_gmt":"2020-12-01T00:42:16","slug":"filing-1099s","status":"publish","type":"post","link":"https:\/\/cpabellingham.com\/blog\/filing-1099s\/","title":{"rendered":"Filing 1099 Forms"},"content":{"rendered":"

Filing 1099 Forms<\/strong><\/p>\n

Between complex rules and changes in filing requirements over the years, there is a lot of confusion around 1099s.\u00a0 This article covers, who<\/u> is required to file 1099s, to whom<\/u> they need to be issued, when<\/u> they are due, and a few related resources to help you with how<\/u> to file them.<\/p>\n

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Who Needs to Issue 1099s<\/em><\/strong><\/p>\n

If you have a small business, are self-employed, or own a rental property treated as a business, then you are required to issue 1099s.\u00a0 This includes sole proprietors, corporations, partnership, LLCs, nonprofits, and individual rental property owners.\u00a0 Individuals making personal payments are not required to issue 1099s.<\/p>\n

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Rental Property Owners<\/em><\/strong><\/p>\n

The requirement for rental property owners is new \u2013 it started in 2018 with the creation of the Qualified Business Income Deduction (QBID). The QBID allows taxpayers to deduct 20% of qualified business income from their taxes, thus reducing the amount of taxable income and income tax to pay.<\/p>\n

The QBID applies to sole proprietorships, s-corporations, partnerships, and sometimes rental properties.\u00a0 Rental properties qualify for this deduction if they qualify as a business.\u00a0 The IRS has not provided definitive, black & white guidance as to when a rental property qualifies as a business (as of the date of publishing this article). So, it has been left to taxpayers and their tax advisors to make this judgment.<\/p>\n

At Thrive Business Group, we use a few simple tests to determine if a rental property qualifies as a business for the purposes of the QBID and therefore the requirement to issue 1099s.<\/p>\n

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  1. In owning the rental property, is your intention to make a profit?<\/li>\n
  2. Do you (or an agent such as a property manager) engage in regular and considerable activity on the rental property?<\/li>\n<\/ol>\n

    If you can answer yes to both of the above, then most likely your rental property qualifies as a business in this context and you are required to file 1099s.\u00a0 If you are still not sure, err on the side of caution and issue 1099s.\u00a0 If you claim the QBID on your rental income, then you are required to file 1099s.<\/p>\n

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    To Whom 1099s are issued<\/em><\/strong><\/p>\n

    1099s are issued to any business or individual that your business or rental property has paid $600 or more for any kind of service or rent.<\/p>\n

    Many small business owners believe that 1099s are only issued to subcontractors, however this requirement is much broader, extending to all service provider payments and rent payments (including real estate\/property rent, machinery rent, and pasture rent).<\/p>\n

    There are some additional special payment types that are required to be reported on 1099s, however they are uncommon and quite specialized and therefore not addressed here.<\/p>\n

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    Exceptions<\/em><\/strong><\/p>\n

    There are a few exceptions to be aware of.\u00a0 Although this is not a comprehensive list of exceptions and special cases, it covers the most common scenarios in small business.<\/p>\n