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When to issue 1099-NEC forms to sole proprietor contractors as a self-managed sole proprietor QBI landlord?

Let's say I'm renting out two different properties as a sole proprietor and am managing my own property.  Folks sometimes say that I would not need to issue 1099-NEC forms as the law was repealed in 2011.  However, I am also seeing folks point out that the IRS specifically states that if you are trying to claim QBI status without the onerous Safe Harbor conditions, by qualifying as a Section 162 trade or business, you better be issuing 1099-NECs as the IRS states that this is necessary for such a qualification.  My sense is that in such a case, you do need to be issuing 1099-NEC forms.

 

Assuming I am correct in this, my question follows.  Given this hypothetical case where I have two rental properties and they are treated as separate QBIs (not aggregated).  If I have a sole proprietor contractor perform over $600 of work during the year on both properties, should they be issued separate 1099-NEC forms for each property, or can they be issued a single form? Relatedly, if the contractor performs $300 of work on each property, does that put them over the $600 threshold for being issued a 1099-NEC form?  Also, if the rental house is my home but 20% is rented out (individual bedrooms), would a $1000 payment to a contractor count as a $1000 payment or a $200 payment for the purposes of the 1099-NEC threshold?

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When to issue 1099-NEC forms to sole proprietor contractors as a self-managed sole proprietor QBI landlord?

A business must file Form 1099-NEC if it paid someone at least $600 during the year and the person meets these criteria:

1)They are not an employee.
2)The business made payment for services in the course of your business — in other words, this wasn’t a personal payment.
3)The recipient is an individual, partnership or estate. In a few cases, payments made to corporations will also need to be included.

**********************

When reporting payments to an independent contractor on Form 1099-NEC, you’ll need to consider the following:

  1. Business Services: If you paid the independent contractor $1,000 for services performed in the cours.... This is the amount related to their business services.

  2. Personal Purposes: The payment for personal purposes does not need to be reported on the 1099-NEC form. Only payments made for services in the course of your trade or business are relevant for this form 

and you look at the total paid for the year for business purposes despite multiple properties being involved. 

 

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2 Replies

When to issue 1099-NEC forms to sole proprietor contractors as a self-managed sole proprietor QBI landlord?

A business must file Form 1099-NEC if it paid someone at least $600 during the year and the person meets these criteria:

1)They are not an employee.
2)The business made payment for services in the course of your business — in other words, this wasn’t a personal payment.
3)The recipient is an individual, partnership or estate. In a few cases, payments made to corporations will also need to be included.

**********************

When reporting payments to an independent contractor on Form 1099-NEC, you’ll need to consider the following:

  1. Business Services: If you paid the independent contractor $1,000 for services performed in the cours.... This is the amount related to their business services.

  2. Personal Purposes: The payment for personal purposes does not need to be reported on the 1099-NEC form. Only payments made for services in the course of your trade or business are relevant for this form 

and you look at the total paid for the year for business purposes despite multiple properties being involved. 

 

Hal_Al
Level 15

When to issue 1099-NEC forms to sole proprietor contractors as a self-managed sole proprietor QBI landlord?

The general rule is that landlords do not need to gibe a 1099-NEC to sole proprietor contractors, who work on their property. But, if you are claiming to be a sole proprietor QBI landlord, you should do so. 

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