1099s are informational tax forms required by the IRS to report certain types of payments made during the year. For real estate investors, this most commonly applies to payments made to contractors using cash, checks, ACH transfers, or Zelle.
Other common transactions that may require 1099 reporting include interest paid to private lenders, payments to attorneys, and business rent payments.
Prior to 2026 the 1099 reporting threshold was $600. Beginning in 2026 the threshold has been increased to payments totaling more than $2,000. This threshold will adjust for inflation beginning in 2027. One important exception is attorney payments, which generally must be reported regardless of the amount paid.
Payments made with a credit card, as well as payments to corporations (S-Corps or C-Corps) are exempt from reporting requirements. The IRS already has an electronic audit trail for these transactions.
One area that has caused confusion over the past few years is electronic payment platforms like PayPal, Venmo, Cash App, and Stripe. Beginning with 2025 filings (filed in 2026), the federal 1099-K reporting threshold reverted back to the older standard of:
- More than $20,000 in payments
- AND more than 200 transactions
This means many smaller vendors and contractors may no longer receive a 1099-K from payment processors. However, real estate investors should not assume that removes their reporting responsibility. Payments made directly by check, ACH, cash, or Zelle may still require the investor to issue Form 1099-NEC.
Because there are so many nuanced rules surrounding 1099 reporting, the requirements can feel overwhelming. Here is a simplified checklist to help determine whether a vendor likely requires a 1099 filing. In general, a vendor may require a 1099 if all the following apply:
- The vendor is a sole proprietor or single-member LLC
- You paid them more than $2,000 during the year
- Payment was made by cash, check, ACH, or Zelle
- The work was related to your business or rental activity
Failure to properly file 1099s can result in IRS penalties, ranging from $60 to over $310 per form, depending on how late they are filed. In cases of intentional disregard, penalties are potentially unlimited. During an audit, the IRS may also challenge deductions related to payments that should have been reported on a 1099 but were not.
One of the ways the IRS ensures compliance with this reporting is to include it as a checkbox on Schedule C.
It’s also on Schedule E.
The best way to stay compliant is to collect Form W-9 from vendors before sending payment. A W-9 provides the information needed to properly prepare 1099s at year end. Best practice is to obtain this form before work begins or payment is issued.
Experienced investors are usually familiar with these rules, but many newer investors are not aware of the filing requirements until tax season arrives. The filing deadline for most 1099s is January 31st, so investors should begin gathering W-9s and reviewing vendor payments well before year end.
REI Bookkeepers offers 1099 filing services to existing clients. If you would like assistance with preparing and filing your 1099s, please notify us before December 15th. We are only able to file 1099s for vendors who provide complete and accurate W-9 information.
