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5179 Views 10 Replies Latest reply: Apr 17, 2012 9:28 AM by amyg RSS
New Member 4 posts since
Apr 11, 2012
Currently Being Moderated

Apr 11, 2012 8:31 AM

Illegal rental?

I recently rented a condo for myself and a couple coworkers while attending a professional conference.  By paying with a personal check, the owner gave a 3% discount.  All went well with the rental, and the property, which was reviewed by the VRBO bear, was just as described and seemed perfect.  I was allowed a certain budget from my work to cover travel expenses, and by using VRBO, I was able to fit everything into that budget.  Now however, I have submitted receipts to my work to be reimbursed for my expenses, and the business office has requested a W9 from the owner.  When I asked the owner to complete the W9, he refused, and it is now unlikely I will be able to be reimbursed for the rental, which was over $1000.  Does this suggest that this owner is renting his property illegally?  He did also ask us to say that we were his "guests" should any other condo tenants or condo employees ask us who we were, which in hindsight now suggests that all is not on the up and up.

 

Is completing a W9 unusual?  Are my suspicions that this owner is renting under the table likely?  Do I have any recourse?  If anyone has any insights, I'd appreciate hearing them.

  • harborfields Contributor 205 posts since
    Jul 12, 2011
    Currently Being Moderated
    Apr 11, 2012 8:56 AM (in response to thejc)
    Re: Illegal rental?

    It is possible that the owner is balking at filling out a W9 because they just don't understand what it is for and why it is needed, but given the rest of your story, it does seem likely that they are renting under the table.

     

    There are several possible areas where he is dodging -- his condo association rules prohibit rentals, he is not paying lodging taxes, his homeowner's insurance doesn't cover rentals, and/or he is not reporting this income on his own tax returns.

     

    If he is taking payments by credit card (as suggested by the discount he gave you for paying by check), then presumably the credit card company is now reporting those sales to the IRS (i.e. through the new requirement for card processors to supply payees with 1099-K forms), so the latter maybe isn't the issue -- in which case, there really should be no reason for him to worry about filling out a W9 form as it is hard to see how that would get back to his condo association or insurance company...

     

    Just my thoughts.

  • sophie Senior Contributor 961 posts since
    Mar 4, 2011
    Currently Being Moderated
    Apr 11, 2012 8:59 AM (in response to thejc)
    Re: Illegal rental?

    This is what a W-9 is and why the business office requested it:

     

    Some people have received a request for Form W-9 from landlords and other people or businesses.  Form W-9 is used to officially ask a person or business to provide their name, address, and taxpayer identification number so that the requesting party can properly issue tax documents to the IRS.

     

    For me, I wouldn't have a problem issuing one because I claim all my rental income with the IRS. It appears that this man DOES not claim his income from the rental. This doesn't make the rental illegal, just that he is skipping out on paying taxes.  Your suspicisions are probably correct in that he is under the table.

     

    As to him saying "Tell people you were his guests".....there is probably a ban on short terms rentals in his condo hoa.

     

    Would your business office take a copy of the contract?  I have had to give that to prove the person who stayed in property actually paid.  In fact, I just had one with the Air Force and they accepted it without any other documentation.

     


    • sodamo Contributor 260 posts since
      Nov 5, 2011
      Currently Being Moderated
      Apr 11, 2012 12:43 PM (in response to sophie)
      Re: Illegal rental?

      Thanks for the definition, Sophie.

       

      David

      • mauioceanview Contributor 250 posts since
        Jul 22, 2011
        Currently Being Moderated
        Apr 11, 2012 12:46 PM (in response to sodamo)
        Re: Illegal rental?

        I am wondering why your company is insisting on the W9 form. You have a copy of the rental agreement and can presumably get a copy of check from your bank. Are they asking for a tax form from the rental car company and hotel too? I don't understand.

         

        And yes, it does sound like he's not allowed to vacation rent in his community.

          • harborfields Contributor 205 posts since
            Jul 12, 2011
            Currently Being Moderated
            Apr 11, 2012 8:02 PM (in response to thejc)
            Re: Illegal rental?

            $600 is the limit above which you are supposed to file 1099-MISC forms for any payments made to individuals. Your company needs the information on the W9 form in order to fill out the end of year 1099-MISC form that they are supposed to send to the person who rented you the condo....

            • carol Senior Contributor 2,134 posts since
              Dec 10, 2010
              Currently Being Moderated
              Apr 11, 2012 11:24 PM (in response to harborfields)
              Re: Illegal rental?

              Yes, I had a rental once to a group from a university and had to fill out similar paperwork -- I don't remember the name of the form, but I did get a 1099 at the end of the year. 

               

              The university has to prove it paid the $$$ to a legitimate person -- otherwise its auditors will worry that someone is paying their relative out of university funds.

  • amyg Active Contributor 323 posts since
    Dec 10, 2010
    Currently Being Moderated
    Apr 17, 2012 9:03 AM (in response to thejc)
    Re: Illegal rental?

    thejc, did the owner outline charges on your invoice for state and/or local sales tax?  If not, that's a red flag that this owner is not reporting the income on his tax returns.  As others pointed out, this doesn't mean his rental property is illegal but if you rent out a second home more than two weeks out of the year, you are required to file the income with the IRS.  See http://www.irs.gov/taxtopics/tc415.html

     

    It's unfortunate because the owner really should be able to provide you a 1099-misc if you need one for reimbursement.  It's a simple form and is standard operating procedure for most small businesses.  If the VR owner is not collecting taxes and taking all payments by check, I am suspicious that this owner is not reporting their income.  If that's the case and the VRBO Bear stayed at and reviewed the property, I have an issue with that because the VRBO Bear designation certainly can influence rental decisions--as it appears it did in your case.  IMHO, Homeaway should not endorse properties that are not operated in a legitimate fashion.  If this owner IS collecting taxes, then there should be no concern on their part with providing you a 1099.  Maybe someone from your university could email them to explain it is only for verification purposes and they can easily get 1099 forms (for free) from the IRS. 

     

    Good luck and please let us know if you are able to get this ironed out.  I hope so!

      • amyg Active Contributor 323 posts since
        Dec 10, 2010
        Currently Being Moderated
        Apr 17, 2012 9:28 AM (in response to thejc)
        Re: Illegal rental?

        thejc, thanks for your follow-up post and I'm glad to hear the university cleared your reimbursement.  I'm just sorry you had to go to all that extra effort. Good luck with next year's rental and make sure they break out the sales tax info for you and agree to send you a 1099 after your stay

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