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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.
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.
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.
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.
Thank you for your replies - this has been helpful.
I did submit the rental agreement and copies of my checks from the bank, and I also don't understand why that isn't good enough, but I was told that if the cost was over $600, then the W9 is required.
After making apologies of ignorance, looks like I am lucking out with a slap on the hand from the business office, but have been told to not do this again.
$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....
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.
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!
In my original inquiry to the owner, I asked the following:
"I would like to know the total rate for these four nights (and for which the website calendar indicated the unit was available) including any taxes and cleaning fees and also assuming that we pay with a check."
In the owner's reply, he just gave a total amount and did not outline any charges for state and/or local taxes. The owner is not taking payments only by check, but certainly by offering a slight discount, it encourages paying by check. And yes, the review by the VRBO Bear did make me take special note of the property.
In all interactions leading to this, the owner was incredibly efficient, easy to work with, and the property was great, and even his refusal was "nice". I asked the owner to reconsider cooperating and additionally, someone from the university did email him to explain the purpose, but I am doubtful he will respond.
The situation is ironed out in that I did get reimbursed, but the issue of the 1099 will come up again next January.