What Are the Landlord 1099 Filing Requirements?
When rental income is treated as a business, landlords have specific tax reporting duties. Learn the requirements for issuing 1099s for service payments.
The Internal Revenue Service (IRS) considers landlords who operate rental properties to be running a business, which carries specific tax reporting responsibilities. When a business pays for services, it must report these payments to the IRS and the service provider using Form 1099. Understanding when and how to file these forms is an aspect of compliant property management.
Determining Your 1099 Filing Requirement
A landlord must issue a Form 1099 when specific conditions are met, centered on the amount paid for services. Because managing rental properties is viewed as a business, payments made for operations are subject to reporting rules. The primary requirement is the $600 threshold; if a landlord pays a single service provider a total of $600 or more during the calendar year, a 1099 is necessary.
This rule applies to payments for services, not for goods or materials. For instance, if you hire a plumber who charges $700 for labor and $200 for a new water heater, you would report the $700 for services. Payments for landscaping, repairs, legal advice, accounting services, and commissions to rental agents are common examples of reportable services. These forms are intended for individuals, sole proprietorships, partnerships, and most limited liability companies (LLCs).
There are important exceptions to this filing requirement. Payments made to C-Corporations and S-Corporations are exempt from 1099 reporting, with a notable exception for payments made to attorneys. Another exception involves the payment method. If you pay a vendor using a credit card, debit card, or a third-party payment network such as PayPal, you do not need to issue a 1099. In these cases, the responsibility shifts to the payment processor, who will issue a Form 1099-K to the vendor if reporting thresholds are met.
When a property manager is involved, the entity responsible for filing is the one that directly pays the vendor. If the property manager pays the plumber from their own account and is later reimbursed by the landlord, the property manager must issue the 1099. Conversely, if the landlord pays the plumber directly, the filing obligation remains with the landlord.
Gathering Information and Preparing Forms
The process of meeting 1099 filing obligations begins with collecting information from service providers using IRS Form W-9, “Request for Taxpayer Identification Number and Certification.” It is a best practice to request a completed and signed W-9 from every vendor before you issue their first payment. This ensures you have all required details on file when it’s time to prepare the tax forms.
The W-9 is used to obtain the vendor’s legal name, business name, mailing address, and Taxpayer Identification Number (TIN). The TIN will either be an individual’s Social Security Number (SSN) or a business’s Employer Identification Number (EIN). The W-9 also requires the vendor to certify their federal tax classification, such as sole proprietor or corporation, which helps determine if an exception to filing applies.
For reporting payments for services, the correct document is Form 1099-NEC, “Nonemployee Compensation.” This form was reintroduced by the IRS for this purpose, separating it from Form 1099-MISC, which is now used for other payments like rent. When filling out Form 1099-NEC, you will use the information from the W-9 to complete the recipient’s information section. In Box 1, “Nonemployee compensation,” you will enter the total amount paid to the vendor for services during the calendar year.
Filing Procedures and Deadlines
The unified deadline for Form 1099-NEC is January 31. By this date, you must have sent Copy B of the form to the recipient and filed Copy A with the IRS. This single deadline applies whether you are filing electronically or on paper.
Electronic filing is required for anyone filing 10 or more information returns in aggregate during a calendar year, which includes other forms like W-2s. Landlords can e-file directly through the IRS’s Information Returns Intake System (IRIS) or use an approved third-party tax software or online filing service.
For landlords filing fewer than 10 forms, paper filing is an option. When filing by mail, you must also complete and include Form 1096, “Annual Summary and Transmittal of U.S. Information Returns.” This form acts as a cover sheet, summarizing the information from all the 1099s you are sending.
Penalties for Non-Compliance
Failing to file required 1099s on time or filing them with incorrect information can lead to financial penalties from the IRS. The penalty structure is tiered, meaning the amount of the penalty per form increases the longer the failure continues. For returns due in 2025, filing within 30 days of the deadline may result in a penalty of $60 per form.
If the forms are filed more than 30 days late but before August 1, the penalty increases to $130 per form. For forms filed after August 1, or not at all, the penalty jumps to $330 per form. Penalties can also be assessed for inaccuracies on the forms, such as an incorrect TIN or payment amount.
The consequences become more severe if the IRS determines that the failure to file was due to intentional disregard of the requirements. In such cases, the penalty for forms filed in 2025 can be a minimum of $660 per form, with no maximum limit.