Form 1099-MISC for Rental Payments

1099-MISC rent

If you rent business property such as office space or storage space, you must issue a Form 1099-MISC to your non-corporation landlord for the rental you paid. Without this, your business deduction for rent payments will be denied under audit. This means if your landlord is an individual, LLC, partnership or trust you must issue the 1099-MISC.

You will need to give your landlord Form W-9 to obtain their tax ID number, name and address. Form W-9 will also show the business entity type for the landlord. Form W-9 can be found here.

The deadline for filing Form 1099-MISC is January 31, 2017 for both the payee and the IRS. If you need assistance with filing Form 1099-MISC, just contact us.

Charitable Deduction Requires Acknowledgement Letter

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The tax code says that no deduction is allowed for any charitable contribution of $250 or more unless the taxpayer substantiates the gift with a contemporaneous written acknowledgement (CWA) from the donee organization. Furthermore, the CWA must state whether the donee supplied the donor with any goods or services in consideration for the gift.

There are innumerable tax court cases of people being denied their charitable contribution because of this requirement:

  1. Contemporaneous means that the receipt from the charitable organization be dated no later than the due date of the tax return – April 15 or October 15 if extended. If it is dated one day after that deadline the contribution will be disallowed by the IRS and by the courts.
  2. The statement of no goods or service being given in consideration is often left off by the charitable organization, probably because they do not know the rules. If you get audited and this statement is not on the receipt, the deduction will be denied. If you then go back to the charitable organization and they send you a new notice with the statement, it will fail requirement #1 – contemporaneous.

In the most recent tax court case the donor lost a $64 million deduction because these rules were not followed. There is no appeal to this. After the fact receipts are disregarded as are receipts without the “goods and services” statement.

Unfortunately, it is up to you the taxpayer to verify that you have the correct receipt.

Charitable contributions can become very complex so you should consider checking with your tax professional when you make a large donation to make sure the receipt meets the requirements. Here are a few items you should know:

  1. Clothing or household items are not deductible if the items has minimal values such as used socks or undergarments or the item is not in good or better condition. An exception to this is antique items worth more than $500 for which you have an appraisal.
  2. Items or groups of similar items for which a deduction of more than $5,000 is claimed must have an appraisal from a third party – not the charitable organization.
  3. Special rules apply to volunteer expenses and mileage but your drive to and from your religious organization for normal services are not a charitable deduction.
  4. Special rules apply for the contribution of vehicles, boats and airplanes.

Please feel free to contact us if you have any questions.

Tax Strategies 8

tax-strategies

#8

Mr. Trump has promised to repeal Obamacare (the Affordable Care Act). The House of Representatives has voted 60 times to repeal the law. With the new President and the new Congress wanting the same thing, the repeal of the Affordable Care Act would likely occur in the first 100 days of the new administration. When the repeal would be effective, what the transition rules would look like, and what would happen to health insurance purchased from the exchange in 2017 is unknown.

Taxpayers now receiving a premium assistance credit will most likely lose that credit when Obamacare is repealed. This means that some taxpayers will not be able to afford health insurance without the government subsidy. It also means that employers who were pushed into offering health insurance to their employees because of Obamacare may drop their policies. If it is likely that the individual taxpayer will lose coverage in 2017, all medical services should be completed while insurance is in place (maybe before February 2017?)