Here Ye Here Ye “Rental property tax law changes go into effect this year” Yes more great news for those who own Real Estate – NOT!
If you are the owner of rental property there is a pretty significant tax law change going into effect for 2012. As of this year anyone who owns rental property must now report all vendors doing work that exceeds $600. For the landlord that holds multiple rental properties this really is nothing new as they have been required to report this to the IRS.
Last year however, the Federal Government enacted the Small Business Jobs Act of 2010 (H.R. 3297) that expanded the reporting requirement to include ANYONE who owns rental property. To put it bluntly the little guy is now required to send a 1099 to contractors working on their homes.
Rental Owner Tax Obligations
If you are the owner of rental property it means you now have a legal obligation to collect information from contractors doing work at your property including their name, address, tax identification number or social security identification. You must also keep a detailed record of what you pay them through out the year. Again at the end of the year you are obligated to send them a 1099 form.
Rental Property Exemptions
There are a few exemptions that would allow a home owner not to report to the IRS including:
• The property is only a temporary rental of your primary residence.
• The income generated from the rental does not meet minimum threshold requirements.
• Putting together the forms necessary to complete the reporting to the IRS would create a hardship for you.
As of this writing the IRS has not determined what would be considered the minimum income and what constitutes a hardship on your part. Expect the IRS to update these requirements soon. In the meantime do not let this deter you from keeping detailed records.
Recording Keeping For All Contractors
The requirement for keeping diligent records applies to all contractors doing work including but not limited to painters, electricians, plumbers, carpenters, landscapers, cleaners and even your accountant. Anything associated with running the business of having a rental property is included in these calculations.
When calculating the work that was generated on the property recoding keeping becomes vital because if you have a landscaper doing work in the beginning of the year that amounts to $350 dollars and later on in the year does another $300 dollars worth of work the burden of providing this information becomes necessary under the new rules.
Rental Tax Penalties For Filing Late
The IRS has not set the important tax dates as of yet for the 2011 tax year. These dates will become important to have on your calender as the penalty for reporting late will be $250 dollars.
You will be able to file a 30 day extension for getting the tax forms to the IRS, however, this will not apply to making sure you get the appropriate forms to the contractors who have done work on your property. The contractors are going to need to have these forms in order to complete their own taxes and the burden is on the rental owner to provide them in a timely fashion.
If you are the owner of rental property you are probably aware of all the tax deductions available to you. If you are considering purchasing a rental property for the 1st time you may want to brush up on the rental property tax deductions. Of course this becomes an important piece of the puzzle come tax time!
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About the author: The above Real Estate information on rental property tax law changes was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 24+ Years.
The IRS has not set the important tax dates as of yet for the 2011 tax year. These dates will become important to have on your calender as the penalty for reporting late will be $250 dollars.
You will be able to file a 30 day extension for getting the tax forms to the IRS, however, this will not apply to making sure you get the appropriate forms to the contractors who have done work on your property. The contractors are going to need to have these forms in order to complete their own taxes and the burden is on the rental owner to provide them in a timely fashion.
If you are the owner of rental property you are probably aware of all the tax deductions available to you. If you are considering purchasing a rental property for the 1st time you may want to brush up on the rental property tax deductions. Of course this becomes an important piece of the puzzle come tax time!
_________________________________________________________________
About the author: The above Real Estate information on rental property tax law changes was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 24+ Years.
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