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Solo 401k FAQ: Will my Solo 401k receive Form 1099 for Section 8 Government-Subsidized Rental Real Estate?
QUESTION:
I am considering renting to low-income tenants whose rent would be paid(mostly) by a govt agency. All rent payments would be made to the Roth Trust. I think the agency would issue 1099 with Recipient’s Name/TIN = Trust. What type of 1099 should they issue?
RESPONSE:
The government agency should issue a 1099-MISC with the solo 401k trust name as the “Payer” and the solo 401k trust EIN would be listed as the “Payer’s TIN.” Whether the solo 401k-owned property is rented to low-income tenants where the majority of the rent is paid by a government agency or to other types of tenants, the funds will flow back to the solo 401k and maintain their tax-deferred status or tax-free status in the case of real estate owned by the Roth portion of the solo 401k. The reason is the solo 401k is a tax-sheltered retirement vehicle. What is more the rental income does not get reported to the IRS from the solo 401k perspective since it flows back to the solo 401k. If they will issue a 1099-MISC, make sure to provide them with a completed W-9 since the solo 401k plan will own the property, you need to list the plan name on the W-9 and use the plan’s EIN. For number 4 “Exemptions” enter exempt payee code 1. This will result in them issuing the 1099 in the name of the solo 401k which means the rental income that flowed back to the solo 401k plan continues to preserve its tax-sheltered status.
