All Forum Posts by: Jessie Niu

@Jessie Niu you get rental income.  You need to be able to show it as an expense so that you don't pay income tax.  Along with that, you have liability issues that you can be exposed to if you don't properly hire, document, and pay contractors.  I'd be happy to talk to you about it via email/messages.

You can get tax deductions on work that you don't have 1099's for, but then you have to save the receipt forever so that if you ever get audited, you have the proof you actually paid it.

 Hey Jesse,

Your CPA should be able to clear this up for you. I'll try to help but I'm not sure what the actual situation you're in is.

You would only need to send 1099s to someone if you contracted them as a contract employee. For example, if you were rehabbing a house under a business name, and subcontracted a plumber to do work in your property, you would need to issue a 1099 to him for work over $600. On the other hand, if you have a rental house, that is in your personal name, and you had a plumbing problem and called a plumber to do work, that would not require a 1099, and would be similar to calling a plumber to your primary residence. Basically 1099s are used to report when you aren't paying payroll tax, but are "employing" someone.

Hope that helps.

@Jessie Niu it doesn't vary by state.

You don't have to send out a 1099 at all, even if it's over $600, if you don't want to do so.  However, you will be taxed on that money, unless you provide the documentation (cough cough a 1099) to show that money is in fact, not your income.  However, to send out a 1099, you have to have the EIN or the SSN of the contractor, which you may or may not be able to obtain after the fact.  If you 1099 the money, they have to pay taxes on it ... so it will be a good litmus test for you to see how your contractor(s) react.

Also, it may not be the worst idea to create a business entity of some kind ... eventually, it could make your taxes a little easier to manage (so you don't have to do one enormously scary tax return)

Edit: try to find a CPA that is familiar with REI, that will make questions like this easy to answer in the future.