Like any other small business, condo and homeowner associations need a little help to keep everything running smoothly. You may hire a contractor to do landscaping, cut the grass, paint the buildings or clean common areas. In addition, you may get assistance from an accountant, attorney and other property management professionals that you pay throughout the year. These people are contractors, so you should be issuing a Tax Form 1099-MISC to each contractor.
A 1099-MISC is issued to contractors who provide services for payment. Below are some of the rules that can apply to community associations. Visit the 2015 IRS instructions for more rules and information on completing the form.
- Contractor payments of $600 or more for services during 2014
- Payments of $600 or more paid to an attorney during the year
- You pay at least $600 in rents or services (includes parts and materials)
- Other income payments totaling at least $600
- For each person from whom you have withheld any federal income tax regardless of the payment amount
As you probably noticed, an amount that totals at least $600 triggers the 1099-MISC. This doesn’t have to be a one-time payment. Any combination of smaller payments to an individual contractor during the year that total $600 or more means that your HOA needs to issue a 1099-MISC.
The IRS rule is that all 1099-MISCs should be in the hands of the recipients by January 31.Because January ends on a weekend this year, the deadline is extended to February 2. You also need to prepare form 1096 for the HOA, which summarizes all the information from your 1099s.
Accountants and property management companies serving community associations should be familiar with 1099-MISC due dates. Ask about the status of your 1099s. If you fail to issue timely and correct 1099-MISCs, your association may be subject to a penalty for each form that is amended or late.
IRS Form 1099-MISCs aren’t difficult if your association hires just a few contractors. But, it can get confusing when many contractors provide services for your association. . Contact your accountant, or professional community association manager, to help you Board understand all your options and avoid putting your HOA at risk.
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