Do I need to send 1099’s?

[Maria Lamb]

I purchased a fixer apartment house, unoccupied, in 2020. It will be ready for occupancy in early 2024. My accountant said I didn’t need to issue any 1099s yet because the property is not in service as a rental. This doesn’t seem right to me, but she is the professional.  In 2022, I paid one contractor about $25,000 (No 1099 issued) and in 2023 I have paid out about $100,000 to several contractors. 

Do I need to send them 1099’s?

[Sean O'Keefe]

Quote from @Melanie P.:

No, not until you have income and expenses associated with operations. The money you've spent thus far will be added to the purchase price for depreciation purposes.

@Melanie P. This is incorrect. For context, the contractors earned the $ in 2022 and 2023 and received payment for their services in 2022 and 2023. As a result, the income the contractors earned and received needs to be reported to the IRS in 2022 and 2023 AND the contractors need to report this income and pay taxes on it in 2022 and 2023. The 1099s are how this taxable income gets reported to the IRS and for contractors to include on their tax returns for 2022 and 2023.

@Maria Lamb you need to issue 1099s to the contractors if the amount paid was at least $600 and falls into specific categories. The 1099s need to be issued by January 31, 2024 (for the amount of payments made to contractors Jan 2023 - Dec 2023) More here from the IRS. 

Since you didn't place the property in service until 2024. You can't start depreciating the investment property or any of the renovation costs that you paid to contractors in 2022 or 2023 until 2024 when you place the property in service. 

The IRS requirement to issue 1099s to contractors you paid for renovations has nothing to do with whether or not you placed the property in service. 

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*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.