Over the past year, we have been informing you of the various changes that came with the new tax law here is one more.
Recently the IRS came out with guidance on how a rental activity may qualify for the new Qualified Business Income (QBI) deduction as a “trade or business” enterprise. They followed up this guidance by stating that if a rental activity qualifies as a “trade or business” and the QBI deduction is taken, then the property owner must issue all required 1099s. Previously 1099s weren’t required for rental activities, so this is a change.
Thus for the calendar year of 2019 rental property owners/businesses must start issuing Forms 1099 if they claim the QBI deduction. These forms are sent to vendors that were paid $600 or more for services. Services include such things as, repairs & maintenance to buildings, fencing, HVAC systems; lawn care and landscaping; painting, and property management. With summer now in full swing, many of you have probably started these projects and have numerous vendors that will require the form.
Here is a helpful tip for businesses of all types:
Have the vendor complete a Form W9 and submit it to you with their invoice. The form contains all the data required to file the 1099s, which have a January 31st deadline each year. Collecting the completed forms now will save considerable time and effort next January. Trying to track down vendors many months after they have been paid can be challenging. A link to the form is included here or you can also go to WWW.IRS.GOV to print a blank copy.
Please contact us with any questions you might have.