Issuing a 1099 to a independent worker

Forum|Forum|2 years ago
January 29, 2024
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I had an individual do some work for me on our condo which we use for a month and rent out the rest of the

year. I paid him $5000. I do file Schedule E on my tax return. Do I need to issue this person a 1099-MISC?

Not A Product Question

DianeW777

Yes, however the form is a 1099-NEC. The payment for your rental property, considered as business with respect to expenses, would be an allowable deduction. If the rental portion of the expense is at least $600, then you would be required to issue a Form 1099-NEC to the individual. See information below:

Reporting Payments to Independent Contractors

File Form 1099-NEC for each person in the course of your business to whom you have paid the following during the year at least $600 in:

Services performed by someone who is not your employee; (including parts and materials) (box 1); or
Payments to an attorney (box 1).

If the following four conditions are met, you must generally report a payment as NEC.

You made the payment to someone who is not your employee.
You made the payment for services in the course of your trade or business/rental
You made the payment to an individual, estate, or, in some cases, a corporation.
You made payments to the payee of at least $600 during the year.

What is a Form 1099-NEC?

To enter your Form 1099-NEC in TurboTax:

Sign in and open or continue your return.
Search for 1099-NEC and select the Jump to link.
Answer the questions and continue through to enter the information from your form.
- If you have multiple 1099-NECs to enter, you can select +Add Another 1099-NEC on the 1099-NEC Summary screen.

When you’re done, we’ll ask you a few questions and help you through entering any expenses you may have so that you can reduce your taxable income.

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nono4taxesAuthor

Is this true even though I am not considered a business as we do not actively participate in the renting of our condo. We do not file Schedule C -- we list our rental income and expenses on Schedule E.

DianeW777

Yes, it's true. Residential rentals are reported on Schedule E. However, the key to whether you are actively participating can be making decisions as to who will be the property manager and deciding what expenses you will pay based on necessity. See the definition below.

Active participation determines how much, you are allowed to reduce other income if your rental activity results in a loss.

Active participation.

You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions.

Active participation is a requirement to be allowed to reduce other income by the loss on your rental property. There is also an income limit that begins to reduce that amount.

Phaseout Rule: The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount.

Sign into your TurboTax return > Search (upper right) > Type rentals > Press enter > Click on the Jump to... link > Edit next to the Rental Activity > Edit next to the Property Profile or General Info > Continue to the question about active participation
Continue to the end of the section for TurboTax to save your changes.

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