End of project/flip - what documentation do I need?

Question

I am wrapping up my flip and was wondering what type of payment documentation I will need for both legal and tax protection.

The project involved a GC, electrician, plumber, and granite vendor.

Do I need to get waivers from all these guys?

I found this form online that seems to be sufficient.

http://www.cslb.ca.gov/Resources/MechanicsLien/ConditionalWaiverAndReleaseOnFinalPayment.pdf

Also, what do I need for taxes? I read that I might need a W9 filled out by each contractor? Is this mandandory per the IRS?

Thanks

Daniel Hyman · Answer

@David Green you will certainly want to send 1099's to all necessary parties. I posted this in a different thread, but I'll add it here as well:

If your business made payments to an independent contractor of $600 or more during the course of the year, you are required to issue a form 1099. Much like a W-2 is issued for an employee, a 1099 is sent to an independent contractor. Contractors can be individuals or companies. You do not need to send a 1099 to most corporations. The information needed to fill out a 1099 can be taken from from the contractor’s W-9. Total payment should be entered in box 7 of the 1099. The deadline for sending 1099’s is Jan 31 – the same date as W-2’s for employees. Penalties for missing the deadline range from $30 $100 per form. Form 1096, which summarizes the totals for all 1099's, must be provided to the IRS no later than March 31. Be sure to keep a record of all your filings. The best way to ensure correct filing is to have accurate bookkeeping and records. And always consult your accountant for further guidelines and instructions.

David Green · Answer

Thanks for the advice guys.  I am sending out W9 and lien wavier forms to everyone and I am going to have a conversation with my accountant about all of this.

Deanna McCormick · Answer

Well to start with any one you paid over $600.00 or over in a calendar year to, you will need to send them a Misc 1099 form. You can send it for anyone you paid any amount to, but for sure those people, even if they were a private contractor, better to be safe than sorry.

YES it is required by IRS. It's better to get a contractor or vendor to give you their for this form which included either thier Soc Sec # or Tax ID number, before they even start work. Also good idea is to get a verification that they have their own workmen s comp insurance, so your not stuck if they get injured on your site, you simply ask them to have their insurance guy send you a certificate of insurance made out to you, for your address your having the work preformed at. I do this for any vendor I use each year, as I carry workmens comp on my properties for myself and workers I know aren't covered themselves. but if I can prove my vendors have insurance when I'm audited, so my insurance agency compute rates in my favor, because vendors had their own coverage

As far as lien waivers, it's good practice to have anyone that worked on the house sign they have been paid and a lien waiver is used for that.

Your General Contractor may have used Subs and you should cover your assets and make sure he has all those subs paid and you have lien waivers to back that up, or other documentation that similar from him, just because they are licensed doesn't mean they paid all their subs off or suppliers for parts and materials.