State Specific Question About: MASSACHUSETTS (MA)

1099-MISC forms were due to the payee on Feb 2nd, and yesterday (March 2) to the the IRS. So while I applaud you for wanting to do the right thing and report, you're kind of behind the 8-ball as far as timeliness.

What to do? If you've got her SSN, that's the main thing. Just file the form and send it to her last known address. It becomes her problem if she failed to report a change of address to you and/or failed to forward her mail. The IRS goes by the SSN or EIN, so they'll still see that you paid her regardless. Keep a scanned or photo copy of the envelop and form, and send certified delivery. If it ever becomes and issue, you can show you made a reasonable effort to get it delivered, if not ON time, and at least you didn't ignore it.

My CPA says that if you miss a deadline, the best thing to do is get it done ASAP. It looks better to do it now and be a few days off vs. wait until October. You may owe a small penalty or nothing at all. They'll let you know.

Some here (including some very knowledgeable people when it comes to taxes) would say that Landlords (that are considered passive, not active, investors) do not have to file 1099-MISC for anyone anyhow. So, you may be fine either way.

As Sid said, if you have the SSN/EIN, just file it. But my guess is that you do NOT have the SSN/EIN since you've waited until (well past) the last minute to do this.

In the future, what you are supposed to do (IF you have to file 1099-MISC at all) is to give them a W-9 to fill out before the work begins. If they refuse to fill it out and you still hire them, you are actually required to keep a portion of their payment to send to the IRS for tax purposes. (I've actually NEVER seen this done in reality, but that's how it is supposed to work.) What most do is this: if they refuse to fill out the W-9, then you refuse to hire them. Problem solved.

- John...

Hi Amy, as John said Landlord are not required to issue 1099-misc forms, unless, they are claiming professional investor status.

Those rules were repealed under H.R. 4 (P.L. 112-9) and made retroactive, as if they had never been enacted. Therefore, landlords, in the ordinary situation of renting out a house or two, do not have to issue 1099s to service providers.

Colin: Could you help clarify some things for me though? You say "renting out a house or two". What about a house or ten? I mean, where is the line drawn. I have 11 units -- but I also have a normal day job.

I still consider myself a "passive" investor by IRS standards. Or, more accurately, I don't feel that I meet their active investor status. Is that a reasonable assumption?

Also, what exactly do they mean by "materially participate"? I mean, I run all of my rentals, of course. I don't hire a PM. I participate in every part of the process of finding tenants, signing leases, and so on. Like I think most of us here do. Are we not all "materially participating" then? I always thought it was a weird thing. Because, to me, pretty much no rental is "passive" to me. But I know the IRS doesn't see it that way.

Number of properties are irrelevant.

Passive equals no participation completely hands off. Losses are set off against other passive income only, i.e. stocks and shares and other real estate losses.

Active: you have some input such as showing, deciding who to lease to etc. but do not spend 750 hours or more per property.You can offset up to $25,000 per year losses against your W2 earnings. This benefit disappears if you earn more that $150k per couple.

Real Estate Professional status:Think about this like being your W2 job. Your income is what is left after ALL expenses, depreciation etc. All your properties are lumped together as business assets.

Above is simplified but hopefully you get the idea.

If that is the case, then I think we need to be very careful when giving out advice that Landlords don't have to file 1099-MISC, right? I mean, I think the VAST MAJORITY of landlords on this site have active input into the process. MOST of us here show apartments, decide who to lease to, and so on (but do not hit the 750 hours mark). That means most of us are "active", right? But not Real Estate Pros. (Regardless of whether or not they want to offset losses against W2 earnings.)

So -- do ACTIVE investors need to file 1099-MISC or not? Are 1099-MISC requirements just for "real estate professional" status? Or would it apply to "active" investors (which I think most of us are) too?

If it is Real Estate Pros only, then I think we're good. If it applies to "Active" investors, then I think a lot of us would need to do it.

Can you confirm that it is for Real Estate Pros only then?

- John...

In all my research on this previously, I AM an active participant, just by showing, etc.

Passive means not being involved at all in your rentals. For most of us, that is not the case. I have NEVER considered myself passive in my real estate properties and personally, I don't think that very many people on this site are passive or they wouldn't need to know all the things posted on this Q and A, as they would have no participation in actively being a landlord.

John,

your Only a real Estate professional is deemed to be in Trade and therefore issue a 1066.

I use a CPA, but just wanted to confirm that for others here mainly.

I agree with you (and Marv) then: Most of us are not required to send 1099-MISC.

- John...