Welcome to 2012, and the new Fiscal Session. There are no bills filed yet, but I'm working with our lobbyist to monitor the session and look for any new bills that may have an impact on us.
Also a quick note on 1099s... last year, a typo in the ARA newsletter claimed that landlords have to send 1099s to their tenants. THIS WAS INCORRECT... but the rumor has taken on a life of its own. Let me say this again: LANDLORDS DO NOT SEND 1099s TO TENANTS.
In brief, the 1099 law was reset last year. In general the rule is: if you pay somebody for $600 of services... and that person is not a corporation or LLC... you must issue a 1099. BUT: if you have any questions, please see a CPA... do not trust to word-of-mouth, rumors or even your best friend.
Thursday, January 12, 2012
Friday, April 8, 2011
The session is over
In general we were not really attacked, nor did we push any new legislation. Our lobbyist did an excellent job for us. There are a few bills that affected us, but there are two that affect us more directly than others: First, HB1991. This bill changes the definition of who has to be licensed to act as a contractor. There was concern that a landlord hiring work for their own property would have to pass the tests and pay licensing fees. Our lobbyist spoke with the sponsor of the bill, and that was not his intent. If you are a landlord hiring work for property you own, you do not have to be a contractor. Second, HB2171. This bill was added at the last minute by Representative Word from Pine Bluff. This bill creates a commission to review and compare Arkansas Landlord-Tenant law with other states and to report on suggestions by December 31, 2012. The commission will have the following appointees:
- Appointee by Governor Beebe
- Appointee by Speaker of the House Robert Moore
- Appointee by President Pro Tempore of the Senate Paul Bookout
- Appointee by the Dean of the U of A Law School
- Appointee by the Dean of the UALR Law School
- Appointee of the Arkansas Realtors’ Association
- Appointee of the Landlords’ Association of Arkansas
- Appointee of the Arkansas Bankers’ Association
- Appointee of the Arkansas Bar Association
- Appointee of the Affordable Housing Association of Arkansas
Friday, March 11, 2011
And a bill sneaks in
We're watching HB2171, filed at the last second on March 7. All the bill contains is a title and a stub. The title is "To Regulate the Rights, Duties, and Responsibilities of landlords and Tenants".
Tuesday, February 22, 2011
Quiet session
First, I must apologize for not being the active blogger of previous sessions. But to be honest... not much is happening in the Legistlature that would affect us. There are various bills we are watching with interest:
HB1050. This bill would allow a utility company to provide financing for energy efficiency improvements through the utility bill. Unlike previous government energy efficiency projects, this one actually allows landlords to participate. There are caveats of course, the landlord would have to notify the tenant up front of the billing. But I would gladly lower my rent to cover the utility billing charge if the numbers made sense.
HB1091. This bill allows solid waste agencies that do not bill through water utilities the ability to bill a property through property tax collections. To be honest, I do not know a landlord this will affect; all the landlords (or their tenants) I know pay the garbage along with the water bill. but I understand the reasoning behind the bill... in the rural areas, a lot of people are not paying their garbage bill. I reviewed this bill and found two small language issues. Working through our lobbyist, the bill's sponsor made the wording changes asked for, and the bill is poised to be passed soon.
HB1391. Modifies the penalties for scrap metal theft. Stealing more than $2500 becomes a class B felony, $500-$2,500 becomes a class C felony. In addition new penalties are included for transporting stolen metal across state lines. This is a new bill, just now going into committee.
Although the session started slowly (the snow didn't help!) the pace will sure pick up soon. A number of tax cuts are going through at this time, but what effect will this have on our state budget? We have to keep watch the next two months.
HB1050. This bill would allow a utility company to provide financing for energy efficiency improvements through the utility bill. Unlike previous government energy efficiency projects, this one actually allows landlords to participate. There are caveats of course, the landlord would have to notify the tenant up front of the billing. But I would gladly lower my rent to cover the utility billing charge if the numbers made sense.
HB1091. This bill allows solid waste agencies that do not bill through water utilities the ability to bill a property through property tax collections. To be honest, I do not know a landlord this will affect; all the landlords (or their tenants) I know pay the garbage along with the water bill. but I understand the reasoning behind the bill... in the rural areas, a lot of people are not paying their garbage bill. I reviewed this bill and found two small language issues. Working through our lobbyist, the bill's sponsor made the wording changes asked for, and the bill is poised to be passed soon.
HB1391. Modifies the penalties for scrap metal theft. Stealing more than $2500 becomes a class B felony, $500-$2,500 becomes a class C felony. In addition new penalties are included for transporting stolen metal across state lines. This is a new bill, just now going into committee.
Although the session started slowly (the snow didn't help!) the pace will sure pick up soon. A number of tax cuts are going through at this time, but what effect will this have on our state budget? We have to keep watch the next two months.
Friday, January 7, 2011
1099 Update - no 1099s to tenants!
This is a follow-up to my blog post earlier today.
There has been a rumor that landlords must file 1099-MISC forms to their tenants. This rumor was given some publicity when it was included in the ARA newsletter that was published in several newspapers.
A few minutes ago I received an email about an update on the ARA website where they updated their page to confirm that filing 1099s for tenants is NOT a requirement of the new law.
Link at ARA: http://arkansasrealtors.wordpress.com/2011/01/03/house-to-house-new-year-means-new-tax-requirements-for-landlords
Thanks for your support! Keep sending me the links!
There has been a rumor that landlords must file 1099-MISC forms to their tenants. This rumor was given some publicity when it was included in the ARA newsletter that was published in several newspapers.
A few minutes ago I received an email about an update on the ARA website where they updated their page to confirm that filing 1099s for tenants is NOT a requirement of the new law.
Link at ARA: http://arkansasrealtors.wordpress.com/2011/01/03/house-to-house-new-year-means-new-tax-requirements-for-landlords
Thanks for your support! Keep sending me the links!
Ready for the new 1099 law?
I wanted to take this blog entry to discuss what I know about the new record keeping requirements for landlords. A lot of rumors are surrounding the new law, and here is what I know about it.
The new requirements are part of the (so-called) “Health Care Reform Act” and also HR 5297, the “Small Business Jobs Act.” The objective is to ensure that landlords report money they pay to contractors and suppliers and that the contractors and suppliers pay the taxes owed to the IRS (Congress is trying to reduce the underground cash economy they imagine exists.)
First: what is a 1099? The IRS 1099 form is a special tax form that is issued to contractors that perform services for an amount that cumulatively exceeds $600 in the tax year. This form is provided by the person making the payment (in our case, the landlord) to the person doing the work (plumber, electrician, handyman, etc.) and filed with the IRS. The person doing the work pays taxes on the income.
The previous law was simple: a landlord filed a 1099-MISC for any services received from a third party who was not a corporation and the total was $600 or more. So in example, if I hired the kid next door to mow my lawns and his total pay was $650, then I would be required to file a 1099. But if I hired Acme Plumbing LLC to do plumbing work, I would not have to file the 1099 since Acme is a LLC corporation.
Starting this tax year, the corporation test is removed. For 2011, if you as a landlord pay a total of $600 or more to a provider of a service, you must file the 1099-MISC with the IRS. It no longer matters if the provider is a plumber, electrician, yard guy, handyman, corporation or individual… if you pay more that $600, you MUST file the 1099-MISC.
In 2012, the requirements extend further: if you as a landlord pay a total of $600 or more to a provider of a service or for goods, you must file a 1099-MISC with the IRS. This adds payments to Lowes, Home Depot, Wal-Mart, etc. In short, anybody you pay a total of $600 to. There are of course penalties for non-compliance.
There is a rumor circulating that claims residential landlords must issue 1099s to our tenants. This rumor has been reported in the "Arkansas Realtor" newsletter to various newspapers. This requirement does not make any sense, as landlords are not paying the tenants for services (remember, a 1099 is issued from the receiver to the provider.) Following this logic, will the tenant be paying the taxes on rent they pay to us?
The closest I can find from my sources is that commercial tenants must now file 1099 forms to their landlords. This makes sense, as commercial tenants deduct rent paid as part of their operating costs. A suspect this is the source of the rumor, and sometwhere in the blogosphere the "commercial" part was lost.
I have been trying to trace any other sources of this rumor, and for the most part cannot find anything other than blogs repeating other blogs’ comments. So at this time, it is just a rumor. If I find out more, of course I’ll post about it. (If anybody has a good source, please email me.)
So, what should you do? While we strongly hope this insane law is repealed, I advise everybody to follow it until then. Starting now, get the tax IDs of every service provider you do business with. I’ve put together a little form that I’ll be using. I’ve been straight up and honest with my providers: I don’t break the law, and if they want my business, I must get their ID.
Next, figure out how you’re going to file these forms. I use QuickBooks 2010 Pro, and it is simple to set up vendors. Once the vendor is tied into the checking account, QB will generate the 1099s without a problem. If you use an accountant to do your taxes, talk to your accountant about your options.
Last, don’t stress out over this law. Remember that as good landlords, we have been required to file 1099-MISC forms already, just for a smaller population. It’s just a matter of good record keeping. And with a touch of luck, the law will be repealed.
The new requirements are part of the (so-called) “Health Care Reform Act” and also HR 5297, the “Small Business Jobs Act.” The objective is to ensure that landlords report money they pay to contractors and suppliers and that the contractors and suppliers pay the taxes owed to the IRS (Congress is trying to reduce the underground cash economy they imagine exists.)
First: what is a 1099? The IRS 1099 form is a special tax form that is issued to contractors that perform services for an amount that cumulatively exceeds $600 in the tax year. This form is provided by the person making the payment (in our case, the landlord) to the person doing the work (plumber, electrician, handyman, etc.) and filed with the IRS. The person doing the work pays taxes on the income.
The previous law was simple: a landlord filed a 1099-MISC for any services received from a third party who was not a corporation and the total was $600 or more. So in example, if I hired the kid next door to mow my lawns and his total pay was $650, then I would be required to file a 1099. But if I hired Acme Plumbing LLC to do plumbing work, I would not have to file the 1099 since Acme is a LLC corporation.
Starting this tax year, the corporation test is removed. For 2011, if you as a landlord pay a total of $600 or more to a provider of a service, you must file the 1099-MISC with the IRS. It no longer matters if the provider is a plumber, electrician, yard guy, handyman, corporation or individual… if you pay more that $600, you MUST file the 1099-MISC.
In 2012, the requirements extend further: if you as a landlord pay a total of $600 or more to a provider of a service or for goods, you must file a 1099-MISC with the IRS. This adds payments to Lowes, Home Depot, Wal-Mart, etc. In short, anybody you pay a total of $600 to. There are of course penalties for non-compliance.
There is a rumor circulating that claims residential landlords must issue 1099s to our tenants. This rumor has been reported in the "Arkansas Realtor" newsletter to various newspapers. This requirement does not make any sense, as landlords are not paying the tenants for services (remember, a 1099 is issued from the receiver to the provider.) Following this logic, will the tenant be paying the taxes on rent they pay to us?
The closest I can find from my sources is that commercial tenants must now file 1099 forms to their landlords. This makes sense, as commercial tenants deduct rent paid as part of their operating costs. A suspect this is the source of the rumor, and sometwhere in the blogosphere the "commercial" part was lost.
I have been trying to trace any other sources of this rumor, and for the most part cannot find anything other than blogs repeating other blogs’ comments. So at this time, it is just a rumor. If I find out more, of course I’ll post about it. (If anybody has a good source, please email me.)
So, what should you do? While we strongly hope this insane law is repealed, I advise everybody to follow it until then. Starting now, get the tax IDs of every service provider you do business with. I’ve put together a little form that I’ll be using. I’ve been straight up and honest with my providers: I don’t break the law, and if they want my business, I must get their ID.
Next, figure out how you’re going to file these forms. I use QuickBooks 2010 Pro, and it is simple to set up vendors. Once the vendor is tied into the checking account, QB will generate the 1099s without a problem. If you use an accountant to do your taxes, talk to your accountant about your options.
Last, don’t stress out over this law. Remember that as good landlords, we have been required to file 1099-MISC forms already, just for a smaller population. It’s just a matter of good record keeping. And with a touch of luck, the law will be repealed.
Tuesday, December 7, 2010
And the first bill is here...
The election is over, and even though the session has not begun, the bills are being filed. So far only a single bill affects landlords: HB 1050, an act to promote energy efficiency. And the bill is not bad to us at all.
The bill's purpose is to promote energy efficiency by allowing the utility companies to finance improvements to the property, and collecting payments through a metering charge. The bill is not simple; and at 10 pages it takes a little while to go through. But the bottom line is that it is clean and I think it is an interesting idea.
The bill has sufficient language to protect landlords from bad tenants signing up for home improvements. And the bill does not allow the utility company to file a lien on the property (although subsequent purchasers will have to assume the liability.) Landlords must give some notices to subsequent tenants, but the notice seems to be "common sense" and not a burden to us.
I hope this bill can be the start of a new direction in energy legislation for Arkansas. Speaking as a homeowner, I would LOVE to improve the energy efficiency of my own home. But the costs of these improvements are too high to make casually. As an example, earlier this year I thought about adding some solar panels to my home. After researching my annual utility bills, I calculated that adding enough solar cells to my house to pay for 50% of my electricity would take 22 years to break even. So as a result, I do not have solar cells.
As a landlord, the federal energy tax credit has irritated me... as a landlord I didn't get any kind of tax credit for improved efficiency HVAC or e-glass windows, etc. And as every landlord knows, energy efficient windows are not cheap... so if I am forced to depreciate the windows over several years, why bother? Landlords cannot simply spend money; it has to make a return, or that landlord will not be a landlord for very long. Our lower income tenants could really use the money from utility savings, yet the government has done little to encourage landlords to make the necessary investment.
If Arkansas really wants to start saving energy, this bill is a good place to start from. But I would encourage our legislature to expand their scope: let's look at tax credits for homeowners and depreciation expansion for landlords... let's REALLY make it advantageous to improve our homes.
The bill's purpose is to promote energy efficiency by allowing the utility companies to finance improvements to the property, and collecting payments through a metering charge. The bill is not simple; and at 10 pages it takes a little while to go through. But the bottom line is that it is clean and I think it is an interesting idea.
The bill has sufficient language to protect landlords from bad tenants signing up for home improvements. And the bill does not allow the utility company to file a lien on the property (although subsequent purchasers will have to assume the liability.) Landlords must give some notices to subsequent tenants, but the notice seems to be "common sense" and not a burden to us.
I hope this bill can be the start of a new direction in energy legislation for Arkansas. Speaking as a homeowner, I would LOVE to improve the energy efficiency of my own home. But the costs of these improvements are too high to make casually. As an example, earlier this year I thought about adding some solar panels to my home. After researching my annual utility bills, I calculated that adding enough solar cells to my house to pay for 50% of my electricity would take 22 years to break even. So as a result, I do not have solar cells.
As a landlord, the federal energy tax credit has irritated me... as a landlord I didn't get any kind of tax credit for improved efficiency HVAC or e-glass windows, etc. And as every landlord knows, energy efficient windows are not cheap... so if I am forced to depreciate the windows over several years, why bother? Landlords cannot simply spend money; it has to make a return, or that landlord will not be a landlord for very long. Our lower income tenants could really use the money from utility savings, yet the government has done little to encourage landlords to make the necessary investment.
If Arkansas really wants to start saving energy, this bill is a good place to start from. But I would encourage our legislature to expand their scope: let's look at tax credits for homeowners and depreciation expansion for landlords... let's REALLY make it advantageous to improve our homes.
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