Call us today: (888) 272 – 4915 (10am - 7pm CT)

Accounting and Tax Tips Blog

As a follow on to our post What is a 1099 and Why Does it Matter, we thought we’d publish a short post on receiving 1099’s and filing 1099’s for homesharers, which are due January 31 for the previous year.

RECEIVING 1099’S

​For platforms such as Airbnb, you will receive a 1099-K if you hit the 200 transaction threshold or reach $20,000 in gross revenues (or “Gross Earnings” according to Airbnb). That means that if you have less than 200 reservations or less than $20,000 in gross revenues, you won’t receive a formal 1099-K from the platform. If you do receive a 1099-K, you’ll need to report the exact amount shown in box 1a as gross receipts on your tax forms and report any fees or commissions as deductions, separately. Any differences between the income shown on the 1099 and the tax form may flag your return for review.
Form 1099-K Gross Earnings 

​Note that gross receipts do not equal payouts. Payouts are less commissions and fees, so you should look at your transaction history to see what was earned before those expenses. Even without a 1099 for smaller amounts, you will want to report gross earnings and not what was paid.
Earnings and Fees 

ISSUING 1099’S

​1099-MISC should be issued anytime you pay $600 in rents or services to contractors. You don’t need to issue 1099’s for personal purposes, only if you intend to deduct the expenses for business. You’ll issue this form to any individual, partnership, or Limited Liability Company (“LLC”). You don’t need to issue 1099’s to corporations.

Typically for homesharers, the top 1099’s that you’ll issue will be:

  • Cleaners – typically cleaners are sole proprietors doing business under a fictitious business name;
  • Home Improvements – any projects where an invoice was issued for over $600, and where the contractor was not a corporation will require a 1099-MISC to be issued. Make sure to include supplies if they were billed to you on the 1099-MISC;
  • Landscaping – any projects above the $600 threshold require issuing a 1099-MISC to be able to claim the deduction.

Just note that these only apply when you contract work. If you are purchasing supplies, an invoice should be sufficient documentation to claim a deduction. One way to limit 1099 issues is to use corporate services for these routine tasks. Platforms such as TurnoverBnB can make cleaning easier for example, since you won’t have to issue 1099’s to cleaners hired on their platform. Using services like these services can provide you with the ease of direct billing and breakouts of fees per project.

The cost of not filing

 We definitely recommend filing 1099’s since penalties for not filing can range from $30 to $100 per form and if it is deemed that you intentionally disregarded the requirement, you will face a minimum penalty of $250 per statement.

The IRS can disallow a deduction for contract work where a 1099 was required but not issued, so you could be looking at paying taxes on contract fees due to the lack of proper documentation. Keep track of payments to contractors in your accounting software or in a simple Excel or Google Sheet where you can easily add up totals per contractor.

HOW TO FILE 1099’S WITH THE IRS

First, you’ll want to issue a Form W9 to your contractors and use that information to fill out the 1099. We recommend issuing these before you have the contractor begin the work. It’s much harder to get a W9 filled out after the year is over.

Unfortunately, you can’t simply print a 1099 online and send it to the IRS. You can only mail official 1099-MISC forms to the IRS since each form will contain its own unique document locator number. In fact, sending in the wrong forms carries a $50 penalty. You can pick up hard copies tat your local office supplies store (e.g., Staples or Office Max).

Indicate non-employee compensation in box 7. If you reimbursed your contractors for supplies, you’ll need to indicate that in box 7 as well. The total should represent the sum of all payments made including parts and materials.

Check the IRS instructions for how to mail information returns or reach out to your tax pro for detailed advice.