Two new tax changes were implemented in recent legislation that may affect a number of tax payers filing 2010 returns in 2011. One affects landlords who now need to disclose all payments made above $600. The other affects people with certain assets outside the US, who now have to formally disclose foreign holdings (like bank accounts) via Form 90-22.1.
Rental Property: If you own any rental property in 2011, you need to issue 1099 form (Miscellaneous Income) to service providers for all payments made by you above $600. Landlords will need to file these forms with the IRS at the year end. These requirements mean you need to keep careful records and take details like person/corporation name, address, SSN, EIN etc of service providers to whom you make payments above $600 (use form W-9 to capture these details)
This provision will only apply to payments made after Dec. 31, 2010, and will cover, for example, payments made to plumbers, painters or accountants in the course of earning the rental income. While rental property owners will not actually issue the required 1099s until early 2012, they need to start keeping adequate records of payments starting Jan. 1, 2011, so they will be prepared to issue correct 1099s.
Foreign Bank and Financial Accounts (FBAR) – Worldwide financial assets (like bank accounts, stocks, fixed deposits) reporting has been made mandatory by IRS during the 2011 tax filing season. This requirement excludes real estate property. Form 90-22.1, should be used to disclose accounts and holdings where the tax payer has a financial interest in, signature authority, or other authority over one or more financial accounts in foreign countries where the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.
No report is required if the aggregate value of the accounts did not exceed $10,000. Penalties for not filing this form is starting from $10000, up to $50000. Form 90-211.1 is not filed as part of your tax return, but sent separately to the IRS and is due to by June 30th.
Sources : Journal of Accountancy, IRS