Do your cleaners issue you an invoice?

Question

Hi BPers,

I'm in the processing of hiring my cleaner for my first property. Does your house cleaner normally give you an invoice after every clean? Probably for your records, it would make sense to have invoices for all of the cleanings. But if your cleaner is going to clean every week (just an example), it just seems excessive for the cleaner to be preparing so many invoices. What kind of set up do you have to pay your cleaner?

Thanks a bunch!

Jon Crosby · Answer

Hi @John Underwood, I'm pretty sure you likely knew this already but I did come across this exemption regarding payment via credit, debit or Pay Pal that will bypass the need for 1099 it looks like.  My accountant verified this as well but apparently companies get 1099'd twice all the time, once from the client and once from the credit card agency.  This rule definitely helps my situation as most my vendors are paid by credit card on file.  Phew!

https://venturebeat.com/2017/11/06/google-and-salesforce-sign-massive-strategic-partnership/

Exceptions to the Contractor/Vendor Rule

You do not have to issue 1099-MISC forms to C- and S-corporations or to entities from whom you purchase products, such as merchandise you'll later resell.

Payments made to contractors and vendors by debit card, credit card or through third parties like PayPal are also exempt—the IRS uses a different method to track these transactions.

Jon Crosby · Answer

Account Closed I use Merry Maids for cleaning and they have everything already dialed in from an invoicing and scheduling perspective. No need to worry about 1099's and I simply ask for a single yearly invoice for tax season.

That being said, I know many people do not like using such services but for me, the easier and more reliable my service providers can be, its worth any incremental extra costs.  They clean my 3/2 cabin in South Lake Tahoe for $135 and are always on time and schedule so I really don't have any complaints about cost.

My only complaint is you do not get quite the consistency of 'cleanliness' every time because different people may be cleaning it from one day to the next, but my guests are happy with the conditions each check in and I simply go straight to the owner for any coaching or complaints that might come thru.

Just another perspective for you to chew on. ;)

Cheers!

Jon Crosby · Answer

Thanks @John Underwood for the advice!  I reached out to my accountant and he says I SHOULD file the 1099!  Thank you so much for bringing this to surface for me! Although my accountant is quite certain Merry Maids is likely exempt he says that you should always do it just in case your expenses are ever audited.

So, looks like I have more work than I planned this tax season.  Not sure WHY he didn't tell me this last year though!  :(

Cheers!

Linda Weygant · Answer

The IRS doesn't care about your other sources of income and if this is really what the CPAs in your club are saying, they might want to study the rules even more intently.  I suspect, however, that either they are oversimplifying their answer because going into the long answer is too cumbersome or you have misinterpreted their answers.

The IRS only cares whether or not you are running your investments like a business.  Here are some hints as to whether it's a business or not:

1.  You file any type of business tax return - 1120, 1120-S, 1065, one of the several trust types, etc.

2.  You qualify as real estate professional (probably not the case if you have another W-2 job)

3.  You are writing off things like mileage, books and education, meals, REI club dues, etc.  This indicates that you are a business, not collecting passive income.

Anybody who operates a business and pays out more than $600 per year to an entity for services is required to at least collect a W-9 from the entity to determine 1099 eligibility.

Many CPAs recommend that you issue a 1099 if you are in a grey area or even if you are a truly passive landlord.  The rules are just not black and white on this and the IRS can issue a penalty of up to $260 PER FORM depending on how late you file it as well as an additional $250 for Willful Negligence.

Not worth it, imo.

John Underwood · Answer

@Nancy Bachety January 15th is our next Upstate CREIA meeting at the Embassy Suits in Greenville.

The CPA's that have explained the 1099 rules to me will be speaking about the new Tax rules and how it effects Real Estate Investors at this next meeting.

Richard Ibeh · Answer

Account Closed Personally no. My cleaners know the clean rate and receive their deposit two days after they confirm it's clean. I require timestamp photos of each area of the house. Only if I happen to forget which is rare they'll send an invoice for any payments missing.

Steven Gesis · Answer

Helen, keep it simple have them invoice you once or twice a month. Yes, you want the invoice for your records, in-fact you want every invoice of every activity for your record, the better and cleaner your books, the simpler and faster you can keep scaling and growing. You need a SYSTEM (Save your self-time energy and money) - just have a standardized invoice submission policy for every task no matter if cleaning or etc.

This has another interesting component, I always think if the "cleaner" expects you to pay every time and you take the time and effort to make complete the transaction, would not be justified to ask the "cleaner" for a small administrative commitment  from them, as that is there business and they should treat it as such.  Everyone wins, everyone grows professionally.

John Underwood · Answer

Jon, my understanding is that if Merry Maids are only a LLC or not Incorporated and you don't have a W2 job then you would still have to issue them a 1099. You can confirm this with a CPA or someone more knowledgeable than myself.

John Underwood · Answer

Account Closed Once you pay your cleaning person either via check or electronically you have a record.

I then take all my expenses and income and put them in a spreadsheet. Each property I own has a column. Then I can add up items to make it easy on my CPA to do my taxes. I also put dates and check numbers as I'm keying in the items while I'm inputting the information. If needed I could easily put my finger on any information needed years from now, even after those thermal receipts have faded.

I don't think you need an invoice if you can prove you made the payment for a tax deductible item.

An invoice by itself just shows you were billed, it doesn't show you actually made the payment.

Account Closed · Answer

@John Underwood Thank you! I appreciate it all the info everyone!

Do your cleaners issue you an invoice?

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