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Scott2014
Returning Member

1099 question with tenants in common

I'm managing rental property left to me and my brothers until we sell it. I'm going to get paid for work I'm doing on the properties. How do I issue the 1099-NEC? 

1) issue 1099-NEC from my SS# to my SS# so I have that as ordinary income (say $6,000). This would be split as an expense to all the owners.

2) Issue 3  1099-NEC is from SS$ of each owner ($2,000 each)

3) What is the correct way to issue the 1099's, either MISC or NEC 

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5 Replies

1099 question with tenants in common

1) issue 1099-NEC from my SS# to my SS# so I have that as ordinary income (say $6,000). This would be split as an expense to all the owners.   You must set up a partnership and get an EIN ... the partnership will issue the 1099.

 

2) Issue 3  1099-NEC is from SS$ of each owner ($2,000 each)  NO ... partners do NOT get issued 1099 forms ... they get a K--1 from the 1065 partnership return.

 

3) What is the correct way to issue the 1099's, either MISC or NEC  ONLY you will get a 1099-NEC if you are working for the partnership via a separate  business of your own and only  if all the partners agree to your "working" for the partnership which is very unusual. 

 

If you have not set up the partnership yet  and you don't know what you are doing then seek local professional assistance so you get this set up correctly for both the Fed & State ... failure to do things correctly can be expensive. Failure to file a timely 1065 is $205 per month per partner and the 2020 form 1065 was due 3/15/21. 

 

1099 question with tenants in common

a tax pro might suggest taking the $6K as a guaranteed payment.  this would produce a $2K deduction for each partner and $6k of income for you.    this would avoid the partnership's need to issue a 1099 to you.

Guaranteed payments to partners are payments meant to compensate a partnerfor services rendered or use of capital. Essentially, they are the equivalent of a salary for partners

regardless of 1099 or GP the $6k would be subject to self-employment tax.

 

 

1099 question with tenants in common

Another good reason to sit down with a local income tax pro and/or an accountant to learn the ins and outs of how to set up the partnership and handle the bookkeeping and income tax filings.  

Scott2014
Returning Member

1099 question with tenants in common

Thanks everyone. This "partnership" started when my dad passed (1/2/21). We expect to sell the two properties within a couple of months. I don't know if it is worth setting up a partnership and then dissolving it the same year. I sit done with a tax pro to see the best way.

  

1099 question with tenants in common

If you inherited the property and are going to sell it in the same tax year then you do NOT set up a partnership ... instead you need to keep track of the money you sink into the property to add to the cost basis reported on each of your Sch D & 8849 on the individual returns.   Seek local professional assistance so  you get this situation reported correctly.  

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