Does a Tenant Issue a 1099 to a Landlord?

The financial relationship between tenants and landlords involves tax reporting, but many are uncertain about their responsibilities for Internal Revenue Service (IRS) forms like the 1099. A tenant’s obligation to report rent payments to the IRS is not a universal requirement. The rules governing this process are specific and depend entirely on the nature of the tenancy.

The Business Rent Reporting Rule

A tenant is only required to issue a Form 1099 to a landlord when rent payments are made in the course of a trade or business. If a business rents property like an office or retail space, it may need to report these payments. The IRS defines a trade or business as an activity carried on for livelihood or profit.

A business tenant must issue a Form 1099-MISC to a landlord if the total rent paid during the calendar year is $600 or more. This threshold applies to the total amount paid to a single landlord, not per property. For instance, if a business pays $50 a month for a storage unit, totaling $600 for the year, the reporting requirement is met.

These rules do not apply to individuals paying rent for personal use. A tenant paying for a home or apartment for personal living does not need to report these payments, regardless of the amount. The distinction is that business rent is a deductible operating expense, while personal rent is a non-deductible living expense.

Information Required from the Landlord

Before a business tenant can fulfill their reporting obligation, they must gather specific information from their landlord. The standard method is requesting the landlord complete Form W-9, Request for Taxpayer Identification Number and Certification. This form is not filed with the IRS but is kept by the tenant for their records and used to prepare the necessary 1099 form.

The information a tenant must obtain from the W-9 is the landlord’s full legal name, mailing address, and Taxpayer Identification Number (TIN). The TIN will be a Social Security Number (SSN) for individual landlords or an Employer Identification Number (EIN) for business entities like an LLC or partnership.

An exception to the 1099 reporting rule involves corporate landlords. Payments made to a landlord that is a C Corporation or an S Corporation do not need to be reported on a Form 1099. The landlord indicates their business structure on the Form W-9, informing the tenant if this exception applies. If the landlord is an individual, LLC, partnership, or estate, the reporting requirement remains.

Completing and Filing Form 1099-MISC

After receiving the completed Form W-9, the tenant must complete Form 1099-MISC, Miscellaneous Information. The total rent paid for the tax year is reported in Box 1, “Rents.” The tenant uses the W-9 to fill in the landlord’s name, address, and TIN, along with their own business information as the payer.

The tenant must send Copy B of the completed Form 1099-MISC to the landlord by January 31 of the year following the payments. This gives the landlord the necessary information to report their rental income accurately on their own tax return.

The tenant must also file Copy A of Form 1099-MISC with the IRS. Electronic filing is required for those who file 10 or more information returns, including forms like 1099s and W-2s. Businesses below this threshold can file by paper mail, which requires including Form 1096, Annual Summary and Transmittal of U.S. Information Returns, as a cover sheet. The IRS filing deadline is March 31 for electronic submissions and February 28 for paper forms.

Consequences of Non-Compliance

Failing to file a required Form 1099-MISC can lead to financial penalties from the IRS. The penalty amount is calculated per form and varies based on how late the form is filed. For example, a small penalty may apply for filing within 30 days of the deadline, while a larger penalty applies for filings after August 1 or for intentional disregard of the requirement.

If a landlord refuses to provide a completed Form W-9, the tenant may be required to begin backup withholding. This involves withholding 24% of the rent payments and remitting it directly to the IRS. This process places a significant administrative burden on the tenant.