Legal Question in Real Estate Law in California

Can manager use a 1099 Federal Tax form to collect

The manager of my apartment complex has threatened to issue a Form 1099 and report to the IRS a half months rent and what she calls: ''ordinary late fees'', (flat fee plus $5.00 per day), deeming it as income earned. I know she can charge a flat late fee; but is it legal to charge $5.00 per day in addition, or issue a 1099 for this?


Asked on 2/20/02, 9:21 pm

1 Answer from Attorneys
Ken Koenen Koenen & Tokunaga, P.C.

Re: Can manager use a 1099 Federal Tax form to collect

She may not charge a flat daily fee. There is a late fee that can be charged, usually a percentage of the rent, but no more. Charging a daily late fee is in violation of statute.

As far as the 1099 is concerned, I think she would be opening a can of worms for herself. First of all, since her daily late fee is illegal, she cannot base it on that. And in order for her to issue a 1099 for "unpaid debt", she would have to report it as income, and then take it as a tax loss, rather than not reporting it at all. If she files her tax return on a cash basis, rather than an accrual basis, she would have no reason to report it.

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Answered on 2/21/02, 1:54 pm


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