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Re: Fill out W9 form for security deposit?

Posted by Lurker-Owner on December 16, 2001 at 16:40:59:

In Reply to: Re: Fill out W9 form for security deposit? posted by consigliere on December 16, 2001 at 15:31:18:

We just stipped out a case on Staten Island where the tenant didn't want to give us a W-9. When he found out he was due about $200 in interest he didn't know he had coming to him that the prior manager didn't pay, he gave it to us.

: Financial institutions don't have to send a 1099 form to the account holder or report to the IRS if an account earns less than $10 interest in a calendar year.

Correct. But most banks (and the GOL requires that the deposits be held in a a "banking organization having a place of business within the state") require the tenant's SSN and do send out the 1099's as a matter of policy.

: There are some other factors to be considered. There is probably only one security account for all the tenants in a building, so all the interest is reported to the IRS. But, each year, the landlord is entitled to keep 1% of the amount of the security deposit as an administrative fee, leaving the tenants with litlle or no interest.

Actually, most banks that I've dealt with (e.g. Citi, EAB, Queens County, Chase) set up their rental security accounts as a master account under the landlord's tax ID no. with tenants' subaccounts under their individual tax ID nos. The administrative fee is then swept from the subaccounts to the master account quarterly or annually. The bank includes this administrative fee on the landlord's 1099 together with interest from CDs, the reserve accounts, etc. And you're right, the rates are pitifully low.

This doesn't mean, of course, that there is anything illegal about holding all of the security in an interest bearing account in a bank.

: I would ignore the landlord's request. But if the landlord presses the issue, I would demand a 1098 form from the landlord, for the interest that you are paying to the landlord in the way of that 1% annual administrative fee.

The problem here is that the tenant is paying the administrative fee. The bank is.

Actually, it sounds like the new landlord is doing things the correct way. The tenant should ask him if you can send the W-9 directly to his bank if the tenant doesn't want the landlord to have it. I have done this in the past.

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