Beginning in 2011, passive owners of business concerns (including owners who rent real estate on a so-called “passive” basis, i.e., managing or investing in rental property is not their primary trade or business) should be aware that legislation enacted in September 2010 (P.L. 111-240) will generally make them subject to all present-law 1099 reporting requirements for active owners.
Passive owners will now be required to remit 1099 forms to all non-corporate entities from which they purchase services exceeding $600. It is estimated that the time to prepare and submit the 1099 forms is minimal and will help the IRS receive an additional $2 billion in tax revenue from vendors and suppliers who do not fully report income at present.
NAA needs to know how this provision will impact you or the members of your local apartment association. NMHC has issued a new guidance document on the changes, which is available on this page. Your input is important so please review this information and then send your feedback to gregorysbrown@naahq.org.
In addition to these changes for passive investors, Congress also included a provision in the health care reform law (P.L. 111-148) that greatly expanded the 1099 reporting requirements for all businesses, including apartment owners. As a result, starting in 2012, all companies will be required to file a 1099 form for aggregate payments exceeding $600 made to corporate as well as unincorporated entities.
They must also now report purchases exceeding $600 for both goods and services. Despite bipartisan agreement that the provisions should be repealed, there is no agreement over how it should be paid for. As a result, repeal legislation failed to pass the lame-duck session.
Lawmakers are expected to take up legislation repealing expanded reporting requirements in the 112th Congress.
View the full document here.