Do you issue 1099-MISC's?

[Kurt Pourbaix]

Apparently since 2012 it has not been necessary to prepare 1099-MISC's related to rental activity unless the activity is a trade or business. See this article:

www.taxcpe.com/blogs/news/1099...

What do you think - do landlords need to file 1099-MISC's? And does it make a difference if the rental activity is within an LLC?

[Eamonn McElroy]

For 2020 forward, the form is actually 1099-NEC.

File if you make payments of $600 or more for services, in the course of a trade or business, to independent contractors in any combination of cash, check, e-check, and certain third party payment platforms.

Payments to a corporate tax entity -- C or S -- generally do not require a 1099, unless the payment is for legal services.

Most rental owners who employ PMs shouldn't be issuing a lot of 1099s.  If the PM is paying contractors and remitting net rent, then the filing obligation falls squarely on the PM.

Most rental owners will only be 1099ing their PM if the PM is not a corporate tax entity, as the standard setup -- take PM fee from gross rents and remit net rent -- means that you're effectively paying the PM in cash.  That and any contractors paid directly.

But the blanket statement that landlords don't have to issue 1099s at all -- well that means you're implicitly taking the position that your rentals don't rise to the level of a trade or business.  And you might find yourself in a catch 22 later if you've been taking QBID or you sell a rental at a loss (remember 2009?) and want to take that loss as ordinary and not capital.

Do you take the advantageous tax treatment, perhaps rightfully so, and expose yourself to failure-to-file penalties for the 1099s?  Or do you forgo the favorable tax treatment?  Take online articles on this subject with a grain of salt.  Half of them are wrong, and the other half are easily misinterpreted by the non-practitioner.