How to get EIN for SDIRA, issue 1099-misc for contractor?

Question

Hello BP'ers,

This is a follow up post to an earlier related post:

http://www.biggerpockets.com/forums/51/topics/81186-1099-on-self-directed-ira-for-a-contractor

How do I obtain an EIN for an SDIRA (not an LLC)?

My contractor is really pressing me for a 1099, although I understand that it is possible that I don't need to issue one.

So, I have 2 options: obtain the EIN for the SDIRA (which I can't find how to do on google) or tell the contractor I won't be doing it.

If I choose the latter, does the contractor merely report that they received income but they don't say where?  That would seem problematic from a 'money laundering' perspective.  If the contractor puts my name, then it would imply a 'prohibited transaction'.    I could tell him to put "Equity Trust Company FBO {yadda yadda yadda)"

I guess my concern in telling him no (beyond I generally like to keep my good contractors happy) is that there will be unmatching income/expense in the IRS' eyes:  somebody is reporting they got paid, but there isn't a matching somebody reporting they paid out.

Thoughts?

Steven Hamilton II · Answer

Erik Kubec,

An IRA is definitely required to issue a 1099 to anyone that is paid over $600 unless it is strictly for a rental property.

You will select

trust,  You will list the IRA's name as it is on your paperwork.  "Equity Trust Company FBO  XXXXX's IRA"

-Steven

Erik Kubec · Answer

Call Equity Trust Company, they can't give tax or legal advice.

I am starting to think that since the SDIRA is not a business, then I don't need to issue a 1099 - misc.  I don't personally issue a 1099 when I hire a contractor to work on my own house.

Michael Gaines · Answer

Select "View Additional Types, Including Tax-Exempt and Governmental Organizations" and then select "IRA"

Avi Garg · Answer

Apologies for bumping an old thread. Recently joined BP and trying to learn as much as possible. This might be a very simple question to most of you so please bear with me. I am trying to get EIN and followed Steven's steps to select trust and then I am getting stuck. What do I select after Trust. The website gives me a bunch of options. Should I select "Trust (All others)"? Any help would be appreciated.

Jerry R. · Answer

Hi Erik,

I am going through the same thing.  I am interested in knowing which selections you used when applying for the EIN as none of the selections seems quite right

Steven Hamilton II · Answer

Bill Walston,

Acquiring an EIN number is something he can do. He can also have any required tax returns prepared; however, the custodian would need to cut the check.

Bill Walston · Answer

Please check with your personal attorney/tax pro before you attempt to get a EIN/TIN for your SDIRA.  You did not make payments to the contractors, your SDIRA made the payments.  Your custodian should issue the 1099s on behalf of the SDIRA,  if they are required. It might appear to be "self-dealing" if you perform functions for your SDIRA that should be performed by the custodian.

Steven Hamilton II · Answer

The ira is a trust account.  If it has to file a tax return it will be the 990

Erik Kubec · Answer

Steven Hamilton II

Going through the site now, although I am unsure what type to select:

I choose "Trust" and then under options these seem the most likely:

"Custodian"  says it is for minors or incapacitated people

"IRA" says:   The IRS will only issue an EIN for an IRA trust account if the individual intends to file Form 990-T (Exempt Organization Business Income Tax Return) or Form 1041 (U.S. Income Tax Return for Estates and Trusts).

"All others" says the trust will need to file a tax return.

-e

Erik Kubec · Answer

Steven Hamilton II

Thanks for the link!  I will try tomorrow during the allocated hours.

-e

How to get EIN for SDIRA, issue 1099-misc for contractor?

Most Popular Reply