What the Small Business Jobs Act of 2010 could spell out for landlords…
By Nick Stratton with Brewer Caldwell
The Small Business Jobs Act, signed by President Obama in September of 2010, has been the topic of much discussion and controversy among business owners. The act’s summary outlines positive effects such as “promoting entrepreneurship, providing access to capital, and encouraging investment in small businesses.”1 However, it also mandates that ALL Landlords’ collecting rental income, “be subject to the same tax reporting requirements as a business or trade.”2 More specifically, landlords will have to issue 1099’s to all businesses, parties and individuals who perform $600 or more on their rental property.
The 1099 form, already required from businesses and companies involved in real estate transactions, is used to help report income to the IRS. The new legislation now requires owners of small portfolios (one to two rental properties) to keep track of work or payments made to contractors.3 This even affects those who have a vacation home that is leased for part of each year. Although the senate has been working towards amending some of the business reporting aspects of the act, the general landlord reporting portion remains untouched.4
Regardless of future changes, it may be wise to keep financial records of all expenses related to every rental property. For those who employ professionals to oversee their rentals, you may even want to verify they are following this practice. While this will place a greater burden on investors and small businesses alike; it appears to stay in effect for now; meaning for work currently being done or that will be done in the future, you might ask each contractor to fill out a W9 form (If performing $600 or more of contracted labor for the year). This can be retrieved directly from the IRS website. http://www.irs.gov/pub/irs-pdf/fw9.pdf
1-The United States Senate Committee on Finance. 5 Aug. 2010. Web. 23 Feb. 2011. <http://finance.senate.gov/legislation/details/?id=da799068-5056-a032-5229-92cebbd2b7a0>.
2- Hemingway, Mark. “New Law Creates Big Tax Headache for Rental Property Owners.” Washington Examiner | Breaking News, Local News, & Political News | Washingtonexaminer.com. 04 Jan. 2011. Web. 15 Feb. 2011. <http://washingtonexaminer.com/print/blogs/beltway-confidential/2011/01/new-law-creates-big-tax-headache-rental-property-owners>.
3- Davis, Manny. “1099s for Landlords Included in Small Business Jobs Act.” All Business. D&B Company, 10 Oct. 2010. Web. 14 Feb. 2011. <http://www.allbusiness.com/government/government-procedure-lawmaking-legislation/15166028-1.html>.
4- Russ Wiles. (2011, February 6). Tax rules put burden on landlords. Arizona Republic,p. D.1. Retrieved February 16, 2011, from Arizona Republic. (Document ID: 2261369311).