1099 Reporting Requirements For Rental Activities

Prior to 2011, federal tax law required every trade or business to file information returns (1099s) to report payments of $600 or more made to non-corporate service providers.  Under those provisions, a rental activity was not considered a trade or business and was not required to comply with those provisions.

In September 2010, the rules changed with regard to rental activities.  Under the provisions of The Small Business Jobs Act of 2010, a taxpayer that has receipts from renting real estate is now considered to be in a trade or business for information reporting purposes.  They will now be subject to those same reporting requirements for payments made to service providers in 2011, and will be required to issue 1099s for the 2011 tax year in early 2012, unless

  •  A taxpayer receives only a minimal amount of rental income;
  • A taxpayer is in the military and rents his/her personal residence on a temporary basis; or,
  • The reporting requirements would cause hardship to the taxpayer.

As of now, the definitions of “minimal amount of rental income” and “hardship” are undefined.  Regulations should clarify the meaning of these terms in the near future.  Stay tuned for further information, but as of now, most rental property owners will be subject to these reporting requirements for 2011.  Now is the time to begin recordkeeping to avoid issues in January.

For more information, please contact Gerry Slapkus, a Director of Tax Services in BBD’s Commercial Enterprise Group.  Gerry can be reached at 215/405-6034 or gslapkus@bbdcpa.com.