Using 1099 forms on non-paying tenants
When you lease a home you should be asking the tenant to fill out a rental aplication. This will include, among other things their social security number.
Hopefully, your screening will be so thorough and your properties overwhelmed with qualified occupants that you will never have the experience of having to evict a tenant, or to seek a judgment. If you are a typical landlord, you may very well have this experience at some time though.
Once you have won your case, you still may not have your money. I have tried using collection agencies, but they haven't been very successful in recovering money due to me, either. Thus, you have a debt owed to you, but no money.
At some point, you are going to decide to write off this money due to you as bad debt. It is unlikely you will ever see it. When you make that decision, be sure to complete a Form 1099. Fill in the debtors name, and social security number, and the last known address. A copy will be mailed to the debtor, and to the IRS. By "forgiving" this debt, you are in essence paying the debtor. For example, he may owe you $1000, so in forgiving the debt, you have added $1000 to his net worth. The 1099 recognizes your debt forgiveness as a taxable event to the debtors. So while you may never get a penny out of your previous tenant, Uncle Sam will tax him for what he owed you. (eg. the $1000 would be viewed by the IRS as income) I don't think I have to tell you the IRS will get what is due them.
For IRS 1099 forms, go to the IRS page located here http://www.irs.gov
64ford,
I like your method, do not know how effective it is, but I like it nonetheless.
Dear 64Ford,
Yes it is annoying when the tenant does not pay and you have to evict. I always feel that I have failed when it gets to that level. I hate seeing the wife and kids standing at the curb, no where to go, and the Sheriff handing me the list of their belongings still in the house. . The look from the tenant, his wife and kids is more then I can handle.
So I don't, never have. Oops I forgot the Gipsys Mr. and Mrs. Adams aka Mr. and Mrs. Williams. Them I just paid for a valve job on their big old car, fixed the tire on the trailer and waved goodby. I missed the part of the floor they took with them and the toaster I had loaned them, but wot the hell they told a great fortune. I told their fortune too I informed in my broken Romansk that upon the next sighting I would fill their gas tank with water. Charged Water. So they left.
Other then that I usualy work things out with my dead beat tenants. If it is multiple units and cheapy rents, I employ them as they start to miss their payment and I break out a little ahead, because I pay them $6 an hour no tax and no insurance, in cash and with hold about half to apply on rent and the other they have to give to their wife so she can buy food. Works out pretty good.
In houses, different story, I usualy can see it coming and I sit down with them and work out what their next deal is. If he is a writer or a story boarder, or creative. I notify relatives to help carry him and his. I stick my nose in and find him work. I love to watch a highly creative writer digging out a broken water supply line and then with horror watch him trying to put in the new one.
One lady ran out of work and could not pay the rent so I put her to work with an idiot writer who cannot spell or type other then two fingers, she edits his stuff and he is selling so she participates and she is almost caught up on the back rent and is up to date on current rent. I try to work things out. This is a pretty crazy place out here in LaLa land and the slummy part of North Hollywood gets hit first when film work departs for overseas and there is nothing going on but independents creating the great masterpieces of no releases for a couple of hundred grand.
There is always work, not pleasant but there is always work and I have my tenants come to me before it gets too bad and I help them out. I built a house once with unemployed actors and my cousin acting as supervisor, Heavy user of smokables, you could get a contact high just by talking to him. He used to wonder why I always wet a hanky and tied it on my nose when I came to inspect. Some of that highly non talented crew have gone on to glory and I see them all over the TV and an occasional bad movie.
At one time I had three families of actors all short on their rent. A friend of mine had to do a big catered occasion and he used them all as maids, servers, butlers, valets you name it. The fun part is they ate almost all of the
snacks served before dinner. Needless to say there was nothing left after that party.
The utilization of a 1099 is I think an act of revenge and I gave up doing that years ago.
Right after I left Grammer School. I think that was the year I was an understudy for Rin Tin Tin. always had a problem with the bark.
Besides the IRS says such terrible things about me. I think they kept my 1987 return as an object lesson on creative financing. I mean why not name your cat as an expense. I listed him under medical expenses. I am allergic to mice and thats what he does, chases mice.
They break in all the new agents on my return. They used to come into the office and take a desk and stay for about three weeks. If they were pretty we took them to lunch and introduced them to movie stars who hit on them and made their day. They would finaly give up and say, listen Lucius, I know there is something going on here, I just cannot find it so lets compromise. You pay another $1,000 in additional tax and I'll leave. I would stagger back clutch my heart and, agree. So out for a Martini and she would be gone.
Come on now, most of you are at cause, you are handling your affairs well, you are all upward mobile. So why not lend a hand for those emotional and economic cripples which surround us?
Besides, it will help you get into heaven, well not all of you. Dont worry Mrs.Metzler I'll stick up for you. Just mention my name they will let you in, in spite of that large goody profit you made the other day.
Of course I have been tithing for years, well, I do it at the local bar, but the intention is the same.
Cheers Lucius
I'm curious how you stay profitable. It seems that the only way you could afford it is if you have a lot of units to offset the rents not received but then if you had a lot of units how would you have time for this individual attention?
I think I have something to learn from you. I'd appreciate your insight.
I think we all have tenants who stole from us both emotionally and financially.
The last lady I evicted called the day I had the "pay or quit notice posted". She said that she had been diagnosed with cancer, had been in the hospital for the past 2 weeks, and was under-going a series of chemotherapy treatments.
One would have to be an emotional zombie not to be touched by such a story. I called the lady across the street to ask her to look after the house for this poor,unfortunate lady. The neighbor said that she saw this lady working in the yard just about every day and I must be mistaken. No, I wasn't mistaken, I was scammed.
I don't know how much a 1099 to a dead-beat really counts. After all, if they can't pay their rent , how much is $3k-$4k added, taxable income to them???
I am working hard on tenant screening and tenant selection. It's my weakest link.
I continue to lose revenue and time evicting tenants. I now get sufficient money up front to almost break even. I'm working on a way to cut the default time in half.
I figure that from the date of default to the date of lease up to another tenant I lose almost 3 months. Multiply that by the number of residences owned and it comes to a substantial loss of time and income.
I have just begun reporting them to the credit bureau and hitting them with a judgement. I realize that this is going to happen. It's one of the cost of retaining real estate. It's my job to miminize this cost. I will never eliminate it.
I was totaly involved for almost three years of my life. I lived ate and breathed all those slummy properties. The head start program was an experiment in social engineering and it was all fun. But I had other considerations that would soon take me overseas so I bundled up all the properties and turned them into owner owned corporations, Some I sold to groups of minority business men who wanted to lead in their own areas of the town.Within a period of six months I was out and converted to paper.
I really missed it but yes it was profitable. A lot of it you just had to charge in rather blindly for a few years until you could catch the pulse.
I learned a lot of things. Mostly that if you stay level, don't look down, or, up. You can effect change.
So there, it was a lot of fun. I shall always remember the principals face when she told me that suddenly into her school had come some Kindergarten and first grade kids who could read and write and memorized their times tables to 12. Man that felt good. She could not believe their manners. Proved a point, a good point.
Cheers Lucius
I enjoyed your comments and with I could write to you personally... I am new to this area and just learning the ropes. Do contact me if you know of a way to do so, otherwise thank you for the chuckles and smiles on this otherwise troublesome day of mine. Thanks again
Dear Landlords and Landladies,
I understand the problem you all have and it is ongoing and constant. I have had as many as 1,800 units which called for the establishment of a management office that looked like a Fighter Control Center, what with the tote boards. We kept over three maintenance crews working all the time.
One night right before the Watts riot I had to give a knife fighting cl***** to a bunch of teenage gangsters intent on collecting tribute. I have kept a tenant from bleeding to death after a fight with her husband. Tore up my shirt and used my belt to tie her off so she would not totaly destroy the carpets by trying to change their color. Try to walk out of that situation with dignity with your pants falling off. I have gone home with so many strange bugs hanging on me I belonged in a Zoo. Watts, Willoughby etc. etc. Nothing but the best. How do you think I learned to dance just one beat off the music? Deep in the hearts of the slums of South LA. Ever play a Shakuhachi at a jam session? I collected rents during the Watts Riot. Got stopped at a light during very middle of it. Only white man around for miles. They are looting a store. They look at me, I smile back. Hay bro how about throwing me one of them little radios. And they did. My managers were all sitting in front of their apartment houses with shotguns so they would not burn them down. My feeling in the matter was let them burn.
So I have been there. But I got creative, some I formed up into Coops and the tenants bought them. Some I created investment opportunities for AfricanAmerican Business men, Doctors, Lawyers etc. Sold them off finaly and moved on.
I had the first in house PreSchool. for an apartment complex I rented only to single ladies with kids. The preschool was so good the kids were going into kindergarten able to read a little and write a little and do their multiplication tables up to 12. Oh god was the School Board mad about that. Seems I borrowed an instruction method in use in religious schools throughout the Middle East, I figured if the method was so good that kids could memorize the entire Koran, its good enough for us. Been there done that. I could go on and on. But why bore you. Suffice it to say, my methods were simple, I involved myself with my tenants. I speak their languages, I know their kids, I have helped out on all kinds of occasions. My reward is that they tell me what the real situation is when things go bad. Together we worked them out.
I am now completely divested, everything is handled. I have been replaced by a family trust. I am 81 and my family were getting a little worried.
Yes I got my first telephone call for help today. My advice get off your couch and go see whats the matter. You know, I miss it already. But, Time the younger generation learned.
Oh well, I get to start in with all you newbies and do it all over again. Sort of Fun.
Cheers Lucius
Lucius,
You let the cat out of the bag...until now I have pictured a middle-aged wise beyond his years RE investor. You write and advise like the youngster you are!
I'd have never guessed your age. Cheers to you and thanks for the wise counsel.
BethE
Dear Beth,
Thank you for your flattering comments. I have applied for membership in the Boy Scouts of America and a quick review of the 5th Grade.
Oh yes, Moses, one of my contemporaries sends his love. Says he is sorry he dropped the other ten commandments. But "wot the hell" as Mehitabel used to say. (Don Marquis author Archy The Cockroach, 1916 to 1933) Just love that book re read it last night.
Cheers, Lucius ein altacocker
Lucius,
Great WISDOM....love your style. Please continue to share yourself and stay young. Wishing you good health & longevity.