The Small Business Jobs Act, P.L. 111-240, requires taxpayers who own rental property (hereinafter referred to as “taxpayers”) to issue Form 1099 (typically Form 1099-Misc) to service providers for payments of $600 or more during the year.
This means that these taxpayers need to start keeping adequate records of payments made to service providers beginning January 1, 2011. For example, payments of at least $600 made to plumbers, painters, attorneys, accountants, etc. will need to be reported to the IRS.
While there exists a hardship exception, the IRS has yet to issue regulations defining a hardship. Accordingly, taxpayers need to immediately implement procedures to properly report these 2011 payments to the IRS in early 2012.
Taxpayers need to immediately send form W-9 to their service providers to obtain the legal name (which is not necessarily the same as the DBA (doing business as) name , employer identification number & mailing address by establishing appropriate procedures setting up an accounting system that captures these payments. Taxpayers also need to make sure that their accounting system allows them to identify the amounts of monies paid to service providers.
Failure to comply with this new IRS requirement will subject the taxpayer to information return penalties.