How do I know if I need to complete a 1099?

Forum|Forum|3 years ago
March 11, 2023
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My wife and I own two rental properties. We had to evict our first deadbeat in 2022 and we incurred several thousand dollars in damages. I'm at the question where it's asking if we paid $600 or more for any work on our property. We paid several hundred dollars each to several contractors or service providers, but we were always their customers; they were never our employees, so I don't think this applies. I believe we only had one service provider that reached the $600 threshold and that was the junk/trash hauling clean-out crew that got rid of all of the initial junk that was left in our property. To my mind, this is not a case that would have required me to give them a 1099 or to have paid payroll tax for them, but how do I know?

Thanks.

AliciaP1

If you operate your rental properties as a business then your business would be responsible for sending a 1099-NEC for all amounts paid to each if you paid more than $600 during the year. If you operate your rental properties as Schedule E investment rental properties you are not required to send a 1099-NEC.

Per the IRS:

You need to request a Form W-9 from your payees that received more than $600 in payments from you in 2022 that were for any of the types listed here:

For each person to whom you have paid at least $600 for the following during the year (Form 1099-NEC😞
- Services performed by someone who is not your employee (including parts and materials)
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- Payments to attorneys (including law firms or other providers of legal services)
For each person to whom you have paid the following during the year (Form 1099-MISC😞
- Rents (Box 1)
- Royalties (Box 2)
- Other income (Box 3), including prizes and awards
- Federal income tax withheld (Box 4), including backup withholding
- Fishing boat proceeds (Box 5)
- Medical and health care services (Box 6)
- Substitute payments in lieu of dividends or interest (Box 😎
- Crop insurance proceeds (Box 9)
- Gross proceeds paid to an attorney, for example in a settlement agreement (Box 10, but payments to attorneys for services are reported on Form 1099-NEC)
- Fish purchased for resale (Box 11)
- Section 409A deferrals (Box 12)
- Excess golden parachute payments (Box 13)
- Nonqualified deferred compensation (Box 14)

This reporting process is also not required if the business you paid is incorporated. This means if the LLC's you paid have chosen to report their taxes as a corporation, you do not have to send a Form 1099. This identification is found on Form W-9 in Box 3.

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