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June 15, 2022
Question

If I pay contractor cash, can I still claim it as expense

  • June 15, 2022
  • 4 replies
  • 0 views

I hired someone to do the painting for my rental property. The contractor prefers cash. He will still give me a receipt. If I pay him with cash, I can still claim this as my rental maintenance right?


Also, do I need to give him 1099? If so how? Do I need to get his SSN? Thank you!

    4 replies

    Employee
    June 15, 2022

    Yes, but he must declare it as income. So be sure to get his SSN or EIN, and issue him a 1099-NEC.

    Employee
    June 15, 2022

    [edited] The IRS rule is that you must issue a 1099-NEC to a contractor to whom you pay $600 or more in the course of your trade or business.  The IRS also says "you are engaged in a trade or business if you
    operate for gain or profit." 

    https://www.irs.gov/pub/irs-pdf/i1099mec.pdf

     

    You must enter the contractor's SSN or EIN on the 1099-NEC.  If the contractor prefers not to divulge his SSN, he can obtain an EIN online here (there's no charge):

    https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

    **Answers are correct to the best of my ability but do not constitute tax or legal advice.
    rjs
    Employee
    June 15, 2022

    You must issue a Form 1099-NEC (not 1099-MISC) to any contractor to whom you pay a total of $600 or more for the year. You must, of course, also file the 1099-NEC with the IRS. As TomD8 said, Form 1099-NEC is only for payments from your business (which includes a rental property), not for a contractor who did work for you personally, such as work on your own home. Form 1099-MISC is no longer used for payments to contractors.


    If the total that you paid a contractor during the year is less than $600, you do not have to issue a 1099-NEC. You can still claim it as an expense of your rental property. Your accounting records for the rental should show the payment.


    In order to issue a 1099-NEC you must have the contractor's tax ID number (EIN or SSN). To avoid problems, you should always get a contractor's tax ID number before the contractor does any work for your rental, even if you don't expect to pay $600 or more, in case you end up using the contractor for additional work later in the year.

     

    Critter-3
    June 16, 2022

     Insist he fills in a W-9 form BEFORE you pay him one thin dime so you have all info you need to issue a 1099 at the end of the year.    https://www.irs.gov/forms-pubs/about-form-w-9

     

     

    Hal_Al
    Employee
    June 16, 2022

    Q. Do I need to give him 1099? If so how? Do I need to get his SSN?

    A. Simple answer: no. 

    It became a little fuzzy under the new 2018 tax law. Landlords are, generally, still not require to issue 1099 forms to service providers.

    References: http://www.forbes.com/sites/irswatch/2013/03/06/should-landlords-be-filing-1099s-for-service-providers/

     

    Q. If I pay him with cash, I can still claim this as my rental maintenance right?

    A. Simple answer: yes. But, your burden of proof in case of an audit will be a little tougher.  In addition to a receipt, it might be helpful if you bank statement showed a withdrawal for that amount in that time frame.  

     

     

    Employee
    June 16, 2022
    June 16, 2022

    very informative article.

     

    It says:

    "The basic rule is that you must file a 1099-NEC form with the IRS if you pay an unincorporated independent contractor $600 or more during a year for rental-related services."

     

    If the contractor has his own business, does that mean I don't need to worry about it?