Quick Answer
If your rental activity rises to the level of a trade or business, you generally must issue Form 1099-NEC to any unincorporated contractor you paid 600 dollars or more during the year for services. Form 1099-MISC covers rents and certain other payments. Recipient copies are due by January 31. The work that determines whether January goes smoothly is collecting a W-9 from every vendor before you pay them, which is a September task, not a January one.
The Threshold Question: Trade or Business?
The 1099 obligation attaches to payments made in the course of a trade or business. For rental owners this is genuinely ambiguous, and the answer depends on facts rather than a bright line.
An owner with a single property, a long-term tenant, and minimal involvement may hold that rental as an investment rather than a trade or business. An owner with several properties, regular vendor relationships, and active management is far more likely to be operating a trade or business. Owners who claim the qualified business income deduction under section 199A for their rental activity are in a particularly awkward position arguing the other way, since that deduction rests on trade-or-business treatment.
This is a question for your CPA, not for a blog post or a forum. What we can say usefully is that many small Richmond owners who assume the rules do not apply to them have never actually asked. The cost of asking once is low; the cost of penalties compounding across several years is not.
Which Form Applies
| Form | Use it for | Common rental examples |
|---|---|---|
| 1099-NEC | Payments of 600 dollars or more for services | Plumber, electrician, landscaper, painter, handyman, cleaner, attorney |
| 1099-MISC | Rents, prizes, other income; also gross proceeds to attorneys | Property manager reporting rents collected to the owner; rent paid to a landlord by a business tenant |
The NEC form was separated out from the MISC form several years ago specifically to handle nonemployee compensation, and its deadline is earlier. Most owners who file anything at all are filing NECs for trade vendors.
Who you generally do not have to 1099
- Corporations, including most C and S corporations. Attorneys are the notable exception; payments to law firms get reported regardless of entity type.
- Vendors paid less than 600 dollars across the entire year. Note that this is cumulative, not per invoice.
- Payments for goods rather than services, such as materials purchased directly from a supplier.
- Payments made by credit card or through a third-party network. These get reported by the payment processor on Form 1099-K, and issuing your own 1099 on top would double-report the vendor.
That last one is worth underlining, because it is a common error. If you paid your painter by credit card, you generally do not issue a 1099-NEC for that payment. If you paid the same painter by check or cash, you do.
The W-9 Discipline
Everything downstream is easy if you do one thing consistently: get a completed Form W-9 from every vendor before you issue their first payment.
The W-9 gives you the vendor’s legal name, business name, entity classification and taxpayer identification number. With it in hand, January is data entry. Without it, January is phone calls to a landscaper who has stopped answering because the season ended.
Making it routine
- Add W-9 collection to your vendor onboarding, alongside proof of insurance and license verification.
- Make the first payment contingent on receiving it. This is standard practice and no legitimate contractor will object.
- Store them somewhere durable and secure. A W-9 contains a Social Security number in many cases, and it deserves the same handling as tenant application data.
- Refresh when a vendor’s business structure changes, such as a sole proprietor incorporating.
If a vendor refuses to provide a W-9, backup withholding rules can require you to withhold a portion of the payment and remit it to the IRS. In practice the simpler answer is to use a different vendor.
Deadlines
- January 31: Recipient copies of 1099-NEC and 1099-MISC must be furnished. 1099-NEC must also be filed with the IRS by this date.
- Late February: Paper filing deadline for 1099-MISC with the IRS.
- Late March: Electronic filing deadline for 1099-MISC.
Confirm the exact dates each year, since deadlines falling on weekends shift. Penalties scale with how late the filing is and are assessed per form, so a portfolio owner with a dozen vendors can accumulate a meaningful amount quickly.
The electronic filing threshold
The IRS has substantially lowered the threshold at which electronic filing becomes mandatory, aggregating across information return types rather than counting each type separately. Owners who previously paper-filed a handful of forms may now be required to file electronically. Check the current threshold before assuming paper is still an option.
If a Property Manager Handles Your Rentals
This changes the picture in a useful way. When a management company collects rent and pays vendors on your behalf, the company generally issues 1099-MISC to you reporting gross rents collected, and handles 1099-NEC reporting for the vendors it engaged and paid.
Two things to understand about the statement you receive:
- It reports gross rents, not what was deposited to you. Management fees, maintenance costs and other disbursements were netted before your distribution but are still part of gross income. You deduct them separately on Schedule E. Owners sometimes report only the deposits and understate both income and expenses.
- It does not cover vendors you paid directly. If you hired your own contractor outside the management relationship, that payment is yours to report.
Reconcile the year-end statement against your own records before handing it to your CPA. Discrepancies are far easier to resolve in January than during an examination.
Recordkeeping That Makes This Painless
- Keep a vendor ledger with year-to-date totals so you can see who crosses 600 dollars before year end.
- Separate payments by method, since card payments are excluded from your reporting obligation.
- Keep the W-9 with the vendor record, not in a general folder.
- Track by property as well as by vendor, which supports Schedule E and any per-property analysis you do.
- Reconcile monthly. Twelve small reconciliations beat one large archaeological dig.
A Twenty-Minute Audit Worth Doing in September
The whole point of raising this before year end is that everything gets harder in January. Set aside twenty minutes now and do the following.
- Pull year-to-date payments by vendor. Sort descending. Anyone at or near 600 dollars is someone you need a W-9 from.
- Flag the missing W-9s. Request them now, while the landscaper is still cutting your grass and has a reason to respond, rather than in January when the season is over.
- Check payment methods. Separate card and third-party-network payments from checks and cash, because the former generally are not yours to report.
- Verify entity types. A vendor who incorporated mid-year changes your obligation. The W-9 on file from two years ago may no longer be accurate.
- Identify anyone approaching the threshold. A handyman at 480 dollars in September will likely cross 600 before December. Get the W-9 with the next invoice rather than after.
Owners who do this in September consistently report that January becomes a filing task rather than an investigation. Owners who skip it spend the last week of the month trying to reach contractors who have no incentive to call back, and occasionally end up filing with missing or incorrect taxpayer identification numbers, which generates IRS notices and correction work later.
If a vendor has gone unresponsive and you cannot obtain a taxpayer identification number, document your solicitation attempts. The record matters if the accuracy of a filing is ever questioned.
Frequently Asked Questions
Do I have to issue a 1099 to my property manager?
Generally not for management fees if the company is a corporation, and most are. The flow usually runs the other way: the manager issues a 1099-MISC to you for rents collected.
What if I only own one rental?
Then the trade-or-business question is genuinely open and worth asking your CPA directly. Many single-property owners do not issue 1099s. Whether that is correct depends on your level of activity and how you are treating the rental elsewhere on your return.
I paid a handyman 800 dollars in cash. Does that need a 1099?
If you have a reporting obligation and he is not incorporated, yes. Cash does not change the requirement, and it removes the paper trail you would want if the deduction were ever questioned.
What happens if I miss the deadline?
Penalties are assessed per form and increase the longer the filing is delayed, with a higher tier for intentional disregard. Filing late is considerably better than not filing.
Do I issue a 1099 for repairs on a property I sold mid-year?
Yes, for payments you made while you owned it, based on your total payments to that vendor during the calendar year.
What about a tenant who paid me rent for a home office?
A business tenant paying rent may issue you a 1099-MISC. You report the rental income regardless of whether you receive a form.
Can I file these myself?
Yes. Several filing services handle it inexpensively, and most accounting software for rentals will generate the forms. Owners with more than a few vendors usually find the service cost trivial against the time saved.
This article is general information, not tax advice. Mission Realty is a property management company, not a tax professional. Confirm your specific obligations with a qualified CPA.
Talk to Mission Realty
Clean vendor records and accurate year-end statements are part of what professional management produces. If you are tired of assembling this yourself each January, learn about our property management services, explore our owner resources, request a free rental analysis, or contact us to talk through your portfolio.
