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Did you rent your Home Office to your Business?

A new law was enacted which changed the rules on filing IRS Form 1099-MISC.

The penalties are higher, and it is becoming more, and more, important for businesses to review the payments for certain business expenses that require the filing of a 1099, especially a 1099-MISC.

It seems that some businesses (S-Corporations and Partnerships) are paying rent to the owners of the business for the “business use” of the owners home office.  The owner gets “rent” income instead of wages, or partnership income.  Rental income is generally considered passive income and not subject to social security or (S/E) tax.

In the past, S-Corporations and Partnerships did not think they were required to file a 1099 for rent paid to the owner of the business.   However, rent paid for business use of a home office is supposed to be reported on a 1099-MISC, even if it was paid the business owner.

The problem now is the penalties are higher, and businesses need to be more aware of who they are required to send 1099’s.  Check out our client information handout Form 1099-MISC.

If you would like us to prepare your 1099’s please contact Kathy at Carpenter’s Tax & Accounting (503) 232-6137.  We do charge a fee to prepare 1099’s and will need pertinent information from you.  Arrange with Kathy as soon as possible because the due date is coming up fast, and we need time to prepare the forms.