Right of Way Payment
I am paying the Right of way -rent along with "Statutory" fee. Do I report both fees together (the right of way and the statutory fees) as rent in box 1 of the form 1099-misc?
There are multiple situations where you may have to report to the same payee in multiple boxes of the Form 1099-MISC. It is important that you do so properly, in particular because it could have important tax consequences for your payee. For instance, amounts reported in Box 7 of the Form 1099-MISC generally carry the expectation that they are subject to self-employment taxes, but amounts in Box 1 do not.
1099-S
I paid a Property Right of Way. Is that reportable or not? Would that be 1099-S?
Right of way payments can be rent (reported in box 1 of Form 1099-MISC) or a purchase (reported on the Form 1099-S) depending on the length of the agreement.
Generally if the length of time is 30 or more years, it is considered a purchase and is reported on the Form 1099-S.
If the length of time is less than 30 years it is rent and reported in box 1 of Form 1099-MISC.
Please keep in mind your basic reportability issues as well, such as reporting threshholds, when you are making your determination.
Easement Payment Reporting Question
I paid an easement to a company. It was the "right to use land, but not purchase the land." Since it wasn't a land purchase, I don't have to issue a 1099-S, correct?
The key to easement payments and whether or where they are reportable lies in the length of time the easement is for. Easement payments are reportable on the Form 1099-MISC as rent, in box 1, if the period of use is less than 30 years. If the easement payment is for a period of 30 years or more, the payment is reported on the Form 1099-S. Note also that the 1099-S is only for proceeds from Real Estate transactions to report the sale or exchange of real estate.
We had an easement with a prior property owner, we . . .
We had an easement with a prior property owner, we met with new owners and obtained a supplemental easement. We made a separate payment for a supplemental easement. In the agreement we agreed that we would pay up to $5000.00 to reimburse the owners for costs associated with revising the owners plat. Is this reimbursement reportable?
Without looking at the agreement, beyond the scope of this service, it is difficult to give a clear answer. An easement may in fact be a purchase of the property if the easement is for a period of more than 30 years. This is true as well if the easement can be renewed over a period of time. Under a normal sale of property, the costs associated with the property are included in the purchase price. Real estate sales are reported on Form 1099-S.
I have included the security deposits for rental property on . . .
I have included the security deposits for rental property on the 1099. The reason being it is income at the time and who is to say the landlord would ever return the deposit. If the landlord does return the deposit is it up to them to adjust their income at that time? I'm confused.
A security deposit is generally not income at the time it is paid to the landlord because it is not earned. It is money put aside in the event of damages, etc. If at the end of the lease, the money is used by the landlord, include the security deposit amount with any other rental payments for the year.
I have received e-mails from 2 of our vendors upset . . .
I have received e-mails from 2 of our vendors upset that I've included amounts paid to them in Box 7 instead of Box 1. The 1099's in question are for parking and a sign space. I guess technically we are renting for the usage of the sign (billboard) and Parking lot (during the tax season only) Should I move these amounts to Box 1? Would that be considered rent? In my mind it's payment for service but I guess it could be rent.
Your question is similar to the question of whether payments to hotels should be reported in box 1 or box 7 and is a gray area where there is scant authority and boils down to making a business decision about how your company proceeds with reporting. When it comes to gray areas such as this, so long as the company has a reasonable basis for making the business decision that it has, and applies that decision consistently, the company can generally avoid penalties.
In addition to rent on a building we occupy, our . . .
In addition to rent on a building we occupy, our rent invoice includes property taxes and utilities. When reporting to the payee, should we report these additional amounts?
Report the gross amount of your payments in Box 1 as rent. You do not have to break out the amounts for taxes and utilities and deduct them to get a net amount to report on the Form 1099. It is the responsibility of the payee to take his own deductions on his own tax return for business expenses such as taxes, utilities, etc.
When we make a rental payment, state sales taxes are . . .
When we make a rental payment, state sales taxes are included in the payment. Do we need to report these taxes or should we exclude that amount?
Report the gross amount of your payments in Box 1 as rent. You do not have to break out the amounts for taxes and utilities and deduct them in order to get a net amount to report on the Form 1099. Just report the gross amount and then it's up to the payee to take his own deductions on his own tax return for his business expenses such as taxes, utilities, etc.
Do we need to report a security deposit paid for . . .
Do we need to report a security deposit paid for a rental property?
The security deposit paid for a rental property is not rental income to the owner. The theory behind the deposit is that it will be returned to the lessee when the lease expires, unless the lessee damages the property in some way. The only time you would report the security deposit is if any portion of it is ultimately retained by the landlord and applied as rent.
Does the $600 threshold apply to rental payments?.
Does the $600 threshold apply to rental payments?
Yes, the threshold does apply. Therefore, you should only report rental payments that total $600 or more for the year.