As a rule, it’s a good idea to avoid causing your landlord any potential tax problems. If you decided to prepay your business’ rent for 2019 to get a tax deduction for 2018, it’s important to report that correctly on your IRS Form 1099-MISC so that you don’t inadvertently cause a headache for your landlord.
If you wrote a rent check for your landlord to cover all of your rent for the year 2019 on the last day of 2018 and mailed it on the same day, your landlord would not have received the check for a few days—which means that he or she would file it as 2019 income. How can this turn into a problem for your landlord?
Let’s say you put both your 2018 and 2019 rent on your Form 1099-MISC. Since your landlord didn’t receive the 2019 rent in 2018, his or her tax return won’t show it. When the IRS notices that discrepancy, they’re liable to open an inquiry on your landlord.
For the IRS’ purposes, your landlord is not considered to have been paid rent until he or she has control over the funds—that is, when he or she has received the check and can cash it. In this example, this would not have happened until January 2019. Therefore, you would only report the rent for 2018 on the 1099-MISC, even if you are planning to deduct both the 2018 and 2019 rent as a taxpayer.
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