The Small Business Jobs Act of 2010Â is amazingly complex legislation. Some pundits estimate that the provisions offering tax relief will actually ‘cost’ up to $12 billion. These taxÂ cutting measures were I believe intended to offer incentive to businesses to make investments in plant, property, more employees and equipment. Which can be great if you are a substantial corporation. However the legislation also has some pitfalls to be aware. Â The one that I blog on today is particularly important for OWNERS OF RENTAL REAL ESTATE.
Specifically the new law will require recipients of rental income to ï¬le information returns using IRS Form 1099-MISC with the IRS andÂ to service providers such as handymen, plumbers, electrician, etc. Reporting payments of $600 or moreÂ during the year for rental property expenses is mandatory with penalties for failure to comply effective January 1, 2011.Â There are limited exceptions to this reporting requirement.Â Members of the military or employees of the intelligence communityÂ who rent their primary residence on a temporary basis, individualsÂ who receive only minimal (to be determined by the IRS) amountsÂ of rental income, and individuals for whom these new requirementsÂ would cause a hardship (also to be determined by the IRS), wouldÂ all be exempt from the reporting requirements.
Additionally the new law substantially increases the penalties for failing to timelyÂ ï¬le information returns with the IRS. The amounts of the penaltiesÂ are broken down into a three-tier approach.
First-tier penalties willÂ be assessed for ï¬ling an information return after the ï¬ling deadlineÂ but not more than 30 days after the due date. These will increaseÂ from $15 to $30 per occurrence; the calendar-year maximumÂ increases from $75,000 to $250,000.
Second-tier penalties will beÂ assessed for ï¬ling an information return more than 30 days afterÂ its due date but before August 1. These will increase from $30 toÂ $60 per occurrence and the calendar-year maximum will increaseÂ from $150,000 to $500,000.
Third-tier penalties will be assessedÂ for failing to ï¬le before August 1. These will increase from $100 toÂ $250 per occurrence; the calendar-year maximum will increase fromÂ $250,000 to $1.5 million.