Did you prepay your 2019 rent so that you have a big 2018 tax deduction?
How do you identify in your accounting records the monies you put on your IRS Form 1099-MISC for the business rent payments to your landlord?
For the 1099-MISC, do you simply look at your checkbook or payment ledgers to identify the amounts you are going to report? If so, you will create an incorrect 1099 for your landlord that’s going to cause your landlord a tax problem.
One golden rule when it comes to your landlord is “do not cause your landlord tax trouble.”
Let’s say you wrote a $55,000 check to your landlord on December 31 and mailed it that day. Your landlord received the check on January 3. Here’s how your Form 1099-MISC can create a tax problem for your landlord:
Your Form 1099-MISC to the landlord shows rent paid of $105,000 ($50,000 paid during the year and then the $55,000 prepayment on December 31).
The landlord’s 2018 federal income tax return shows $50,000 in rent received (he received the $55,000 in 2019).
IRS computers note the difference and start an inquiry.
An incorrect 1099 that overstates the landlord’s income is a problem that can lead to a tax audit.
One big cause of an incorrect 1099-MISC is not understanding the definition of 1099 income. In this article, you will learn how to use the technically correct methods to eliminate the mismatch problem. ... Log in to view full article.