Do All Business Rents Need a 1099?
The Internal Revenue Service requires businesses to issue a 1099 to each and every unincorporated entity for which it paid for services exceeding $600 in any given tax year. This includes rental payments a company makes for office, warehouse, commercial or retail space. However, property lease or rent payments made to corporations and real estate agents do not necessitate a 1099.
You must issue Form 1099-MISC to each individual and business that your company paid rental income in excess of $600 during a calendar year for property or space. You must also file these forms with the IRS. For rent payments, check Box 1 on Form 1099-MISC and write in the total amount for the year paid to that entity. The IRS requires that you issue these forms at the beginning of the following tax year to allow recipients sufficient tax preparation time.
The IRS exempts any rental payments your company made to corporations and to real estate agents from the 1099 reporting requirement. Corporations are generally exempt from all Form 1099 reporting requirements, except in a few circumstances. Real estate agents, unless acting on their own behalf, typically represent other businesses in property rental transactions as brokers or agents. If you make your rental payments out to the agent, then you do not need to complete Form 1099-MISC for those payments.
You must file Form 1099s for all other businesses including LLCs, limited partnerships, general partnerships and sole proprietors to which you pay rent over the minimum threshold. Require all of these entities to complete and sign a W-9. A W-9 form supplies your business with identifying information such as legal name and EIN number or SSN which are needed to properly issue and file a 1099. If you are unsure whether or not the business or individual you pay rent to is a corporation or real estate agent, request a W-9 to be certain. Both forms can be ordered free of charge through the IRS website.
Your company rents two separate locations, an office and a warehouse, and makes rental payments to two different entities. Your company pays $3,000 in monthly rent to ABC, LLC for the office and $2,000 per month to Jessica Doe, a real estate agent, for the warehouse space. You must obtain a W-9 for ABC, LLC and file Form 1099-MISC for the $36,000 in annual rent your business paid ABC. The $24,000 in payments you made to Ms. Doe during the tax year does not require a 1099 filing.