Legal Question in Tax Law in Massachusetts
Interest on security deposit by tenants. Is a landlord or landlord company suppose to mail 1099's at the end of the year to the tenants on the interest of the security deposit for tax purposes and also give the tenant either the interest accrued or allow for that deduction of rent? If landlord or landlord company fails to do this for lets say 6 years to all the tenants (approx. 200 plus) is there any penalties or fines from IRS for failing to do so? Could this also be a sign that perhaps it was not deposited in a separate interest bearing account?
1 Answer from Attorneys
The Landlord is required to pay you interest each year on the security deposit. If he pays you the interest he should give you a 1099. However, current interest rates have been so low it may not be significant amount of money. Bank only pays 1% interest.
Failure to comply with the law entitles the Tenant to demand their security deposit back. Make sure what you have given is a security deposit not last months rent. The rules are slightly different.
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