A lot of answers in this forum to similar questions say landlords do not need to issue 1099 forms for work (repairs/improvements) done to their rentals by contractors but the answers are from a while ago and I wonder if the rules changed for 2017 tax year?
It's still the same. A few years back the law on who has to issue 1099-MISCs was re-written and it was so vague that "technically" rental property owners did have to issue them. So the IRS clarified it in some type of IRS Notice and specifically stated that rental property owners do not have to issue 1099-MISCs.
Now if you are a property manager and property management is your business (SCH C) then yes, you have to issue 1099-MISCs. but for rental property owner's like us that report on SCH E, we are not required to issue 1099-MISCs.
TurboTax left that question in the SCH E interview section as a "just in case they change their mind" thing.
I would recommend issuing them.
It is required for a "Trade or Business". In SOME cases, rental properties can be a "Trade or Business". The Tax Court has even ruled that in some cases even one rental property could be a "Trade or Business".
In the past, for most things it didn't really matter much if a rental was classified as a "Trade or Business" or not. However, starting in 2018, rentals that qualify as a "Trade or Business" can potentially qualify for the new 20% §199A deduction (if all other qualifications are met). So now it is highly desired to for the rental to be classified as a "Trade or Business", and filing 1099s could support that.
If the contractors were incorporated you don't need to send them 1099s.
@TaxGuyBill Even so, 1099's are only necessary if you paid an *individual* more than $600 during the tax year. If you paid another business, such as the bug sprayer or even your licensed yard man (if yard care is included with your lease), the 1099 is not necessary.
Now it can be tricky with the yard man. If you make your checks payable to him personally, with his name on the check, then I would consider that "paying an individual" and do the 1099 *maybe*. However, if you make the check payable to "Bill's Lawn Service" then you're paying a business and the 1099 is not required.
I've been a landlord for 25 plus years with three rentals, and have never issued 1099's. Ever. I've had new roofs, new windows and quite a few other things in that time that each easily costs over $600. Not once was a 1099 issued. Of course, I don't hire "individuals" to do such big jobs either. I hire businesses who specialize in the work I need done.
As for the new 20% deduction, I've not really read up on that other than to peruse the new rules on it. From what I've read so far, I get the distinct impression that only applies to a business that has W-2 employees. But then, I've only perused the HR bill which requires some rather deep comprehension. I'd much rather deal with reading the IRS pubs on it, if they ever come out in a timely manner.
Now I'm not all that great with "Statutes", but as soon as I post this I'm googling §199A and will see if I can make sense of it, as it applies to me as a landlord.
Carl, it is not just to "individuals". In most cases, 1099-MISCs are for non-corporations. So "Bill's Lawn Service" would likely need a 1099. "Bill's Lawn Service Inc." would not. The only way to know for sure is to have the contractor fill out a W-9 before you pay them.
The 1099-MISC is only required for a "Trade or Business". Because it can be a "gray area", many people do not treat their rentals as a "Trade or Business" and don't send out 1099-MISCs. It is probably not a big deal. Until now.
The recently released Proposed Regulations for §199A say that only "self rentals" and "§162 rentals" qualify (§162 is for a "Trade or Business"). Although there are only the Proposed Regulations, as of now, that is what the IRS is stating. So if the rental property shows a taxable profit, it would be quite advantageous for a rental to be classified as a "Trade or Business" to potentially qualify for the 20% deduction.