1099M

Started by BarbaraS • 3 replies • 1787 views

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BarbaraS (New Mexico)
Posts: 49

Posted:

My head is whirling! I have read with interest all of your comments. When our HOA applied for an EIN, I was told by the IRS agent that the HOA does NOT have to have employees in order to have an EIN. So what are our maintenance men to be called? Are we still considered a business even thought our mainenance fees are tax exempt. We have to get help wherever we can as the need arises, involving several contractors - with no job coming in less than $600. We have all of them sign as an independents, responsible for their own SS,insurance, workmens comp and taxes and deduct nothing. Must we send 1099M' for each and every handy man we hire? I was also told by the IRS that the 1099M's must be accompanied by a 1086 which itemizes the documents sent.

I would like to just lump everything together on line 10 of the 1120H (HOA expenses) but I suppose that would be too simple.

Also, what is this W9? Is it to be sent also to the IRS or is it just a verification of the SSN for our records?
You are all wonderful and I sincerely appreciate your input.

BrianB (California)
Posts: 2,820

Posted:

Barbara, i believe it all lies in the status of the folks you are hiring. If you hire a "handyman" who runs his own business, yellow page listing, incorporated or LLC, etc., you probably don't have to file 1099's, as he is a corporation. You can ask the man to be sure. If the "handyman" you hire sends out a different worker for each problem/month/service, it is more likely he is a company, than if he came out every time (ie, he has employees, other jobs, etc..). That is not a hard and fast rule, however, but a general guide. Other things to look for: professional letterheads, company names on vehicles, not personal vehicles. Rotating employees, professional billing, accounting practices, storefront. Of course, anyone can run a corporation from their garage, but these clues can help.

If you hire a landscape service, you likely don't have to file 1099's, if they look, act, and profess in writing to be a company. Can they lie? certainly, and many do... but you do your due diligence, ask for proof, and keep copies. If you hire Terri and friends to do landscaping, then you probably need to file those 1099's.. it is unlikely that Terri and friends are any more than college students picking up extra cash, etc..

To use another example: If you hire Terri to clean your house/clubhouse repeatedly (ie, over that $600 limit), you probably need to file a 1099. If you hire Merry Maids to do it, you likely do not need to file a 1099.

The biggest problem is in those folks who run small businesses.. they can skirt the line, hiring folks to do work for them, paying cash under the IRS radar, etc.. In any case, it never hurts to document any proof you have that they are a legitimate corporation/business.. so getting the forms they have to prove licensing, corporation status, copies of their work comp insurance payments, documents showing withholding, etc. are good ideas for your defense, should it ever arise.

BarbaraS (New Mexico)
Posts: 49

Posted:

Thank you Brian. It is all so confusing. My husband and I hired a painter (through the grapevine) to paint our house, wrote him a check for $4000 and that was that. If each of our retired homeowners paid our handyman individually for repair work on their unit the price would fall under the $600 limit for each of them. The first two words in HOA cause me to wonder what the difference is between what my husband and I did and what the HOA does in behalf of these owners.

BrianB (California)
Posts: 2,820

Posted:

One of the key differences is whether you are acting as a person, or as a business or corporation.. different rules apply there too.

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