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What if a Contractor or Vendor Refuses to Provide a W-9 for a 1099?
In our last blog, Filing a Form 1099, we discussed business’s 1099 filing requirements. Here, we will discuss what a business should do if a contractor, vendor, or other person will not provide the information necessary for the business to prepare and file a 1099.
If a business (including sole proprietors) pays a contractor, vendor, or another person (collectively referred to as a “payee”) $600 or more for services, goods, or rent over the course of a tax year, the business is required to report these payments to the IRS on an information return called Form 1099. See, e.g., I.R.C. § 6041. The 1099 must state the payee’s name, address, and tax identification number (TIN), as well as the total amount paid to the payee during the year, in order to be valid. See I.R.C. §§ 6041 and 6109(A)(3); Treas. Reg. §§ 1.6041-6 and 301.6109-1.
Form W-9 and TINs
IRS Form W-9 is typically used by a business to request a payee’s name, address and taxpayer identification number (TIN) so the business can issue a 1099 to the payee and to the IRS. Filling out a W-9 form isn’t very difficult as it really only requires a few pieces of basic information.
A business relies on the W-9 form as a source for a payee’s personal information, the most important of which is the taxpayer Identification number (TIN). In the case of individuals, a TIN is actually the person’s social security number (SSN). In the case of businesses, a TIN is the business’s employer identification number (EIN).
There is no reason for a payee not to supply a TIN, unless the payee qualifies for an exemption (not likely), or is trying to avoid reporting the income or payments received to the IRS. Some payees refuse to provide this information to the business, however.
The business that is required to issue and file Form 1099 is responsible for requesting that its contractors, vendors, or other payees fill out and return Form W-9. Accordingly, a business who pays a person (including other businesses) more than $600 per year should have the payee fill out and sign Form W-9 at the time that the independent contractor, vendor, or other relationship commences, and prior to paying any sums to the person. Indeed, filling out Form W-9 should be a provision of the contract or agreement which provides for the work, services, or goods, and payment therefore, although failure to include this requirement in the contract or agreement does excuse a contractor, vendor, or other payee from providing the required information to the business on request.
Once a business obtains a filled out W-9 from a contractor, vendor, or other payee, the business must keep the form, or a copy thereof, in its records, and use the information on the form to prepare its 1099. Form W-9 is not filed with the IRS.
The information provided by a payee to a business on Form W-9 must be protected by the business. A business is not allowed to misuse or disclose the information provided to it by a worker, contractor, vendor, landlord, or other person, or the business may be subject to civil and/or criminal penalties.
The business that does not obtain a taxpayer identification number from a payee or properly and completely fill out its 1099 information returns to include the payee’s information, including taxpayer identification number, or timely issue and file its 1099 information returns, may also be subject to penalties. There are exceptions to this, however. For instance, if a contractor, vendor, or other payee refuses to provide the correct or complete information to the requesting business in order for the business to properly issue and file its information returns, this may serve to mitigate the imposition of any penalties on the business.
Finally, a business is required to timely issue and file any required information returns. A contractor, vendor, or other payee’s failure to provide a taxpayer identification number does not excuse the business from timely meeting its filing requirements. (See below for discussion of what to do if a payee neglects or refuses to provide information required to be shown on a 1099 information return.)
A payee who receives a proper request from a business (including sole proprietors) to fill out a W-9 is required to fill out the form and return it to the business. The requirement is contained in section 6109 of the Internal Revenue Code and accompanying Treasury Regulations. See I.R.C. § 6109(a)(2), (3); see also Treas. Reg. § 301.6109-1(b)(1) (“A U.S. person whose number must be included on a document filed by another person must give the taxpayer identifying number so required to the other person on request.”). Indeed, the general instructions on page one of the current Form W-9 indicate that it is mandatory to provide a taxpayer identification number to a business who properly requests it:
Payments which are reported on an information return such as a 1099 tend not to be subject to federal income tax withholding. But a person (including a business) may be subject to backup withholding, at the rate of 28 percent, if the person neglects or refuses to provide an accurate and valid TIN when properly requested to do so by a business.
What if a payee provides an incorrect TIN?
When a business files a Form 1099 with the IRS, the IRS uses its TIN matching program to verify that the name and TIN on the Form 1099 information return match and are correct.
If the TIN is incorrect, the IRS will notify the business by sending the business a CP2100 or a CP2100A Notice and a listing of incorrect name(s)/TIN(s) reported on the 1099 information return(s) filed by the business. The CP2100 or CP2100A Notice from the IRS will state the requirement that the business begin backup withholding, at the rate of 28 percent, from future payments to the payee who supplied the incorrect TIN.
Generally the business must begin backup withholding on all reportable payments to the payee within 30 days of receiving the notice, although the business should carefully review the notice for specific requirements.
The notice to the business will also state the requirement that the business send a “B” Notice, along with Form W-9, to the payee within 15 business days after the business receives a CP2100 or CP2100A Notice.
If the payee does not correct his TIN, the business may be required to send additional notices to the payee.
What if a payee refuses or neglects to provide a TIN?
If a payee refuses or neglects to provide a TIN when properly requested by a business, the business should immediately begin backup withholding, at the rate of 28 percent, on any reportable payments made to the payee (and remit this amount to the IRS).
The business should also make up to three solicitations to the payee for the payee’s TIN, in order to avoid a penalty for failing to include a TIN on the Form 1099 information return filed by the business.
Finally, if a contractor, vendor, or other payee refuses or fails to provide his taxpayer identification number, the business should still fill out and timely file its 1099 information return(s) with a notation that the payee failed or refused to provide his taxpayer identification number. Failure to file Form 1099 based on a person’s refusal or failure to provide his taxpayer identification number does not excuse the business from timely filing all required information returns.
Both the business and the contractor, vendor, or other payee may be subject to penalties for their respective failures when it comes to information returns and providing the required information.
A business may be penalized, both civilly and criminally, for its failures with respect to its information return obligations. The following penalties are just a few examples of penalties a business may face:
A payee may face multiple civil and/or criminal penalties for failing to provide accurate information, including the payee’s TIN, to a business that properly requests the same. The following are some of the penalties a payee may face:
When To Seek Help
The Internal Revenue Code and IRS Regulations concerning information return reporting requirements are complex. The many nuances, penalties, and other rules can be confusing even to the savviest person, and their application often varies based on a particular set of facts and circumstances.
Because each situation is unique and has its own facts and circumstances, we recommend you contact a tax attorney to discuss and obtain advice as to your particular situation. Whether you are a business, a contractor, a vendor, or other person, the tax attorneys at the Politte Law Offices are here to help.
If you are unsure about your filing and/or reporting requirements, are facing penalties on account of any of the failures mentioned above, or have any other question or concern, we can help. Contact us today.
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When are Legal Settlements Taxable?
More often than not, the taxability of an award or legal settlement is not on the forefront of a person’s mind when they are a party to a dispute or a lawsuit. Yet the tax implications of an award or legal settlement are important and should not be ignored, or there may be issues down […]READ MORE
What if a Contractor or Vendor Refuses to Provide a W-9 for a 1099?
In our last blog, Filing a Form 1099, we discussed business’s 1099 filing requirements. Here, we will discuss what a business should do if a contractor, vendor, or other person will not provide the information necessary for the business to prepare and file a 1099. If a business (including sole proprietors) pays a contractor, vendor, […]READ MORE
Filing a Form 1099
You have a business, and your business paid an independent contractor, vendor, or other person for services, goods, or rent sometime during the year. Perhaps you paid an accountant to do your bookkeeping, or an attorney to advise you regarding a contract. Maybe you paid someone to do some overflow work for you for a few weeks […]READ MORE
I worked as a contractor for a couple of months in 2020 and have been asked to submit an invoice for payment along with W-9. This company has had data breaches and I no longer trust them with my TIN or other personal info (i.e., electronic deposit). I would rather forego payment ($2500) than provide W-9 info but is it possible to assign/designate another payee, i.e., church, charitable org, another individual, etc.? I assume the assigned payee would have to provide W-9, etc. and report the payment as income. If this is possible, would I still be liable for any taxes or reporting anything to the IRS?
Generally, yes, you are liable for reporting the income even if you designate the payment to a third party. If you forgo the payment altogether (with no designating it to a third party), then you would not have to report the income.
I suggest contacting the company and trying to see if there is a workaround to your security concerns. Perhaps you could enter into an agreement with the company and its accountant that the accountant gets the W-9 and will not share it with the company and, for the 1099, only provides a redacted copy of the 1099 (with your SSN redacted) to the company while the accountant retains the original.
Very good information here. My question is regarding a law firm who received funds into the Client Trust account, then dispersed them to the client. The insurance company of the defendant sent a w-9 to the attorney with both names (client & law firm). Any advice? Who sends it back? Aren’t Trust accounts exempt? I am very ignorant on this topic. Thanks
Who was the payment to? What does the settlement agreement say (if anything) about the 1099? If both the attorney’s and client’s names were on the check, both may be required to fill out the 1099 (it also depends on what the payment was for–that’s why I say may). I suggest contacting us for further information about how to report the 1099 amounts on the attorney’s and client’s returns.
I am a seasonal with W2 real estate investor. During 2019’s I ran into a pretty bad situations with several contractors during rehab of a property that I bought. I did let go some for not doing the job as agreed and have change changes couple contractors on different area on various works. I completely don’t know anything about 1099s period. I highly doubt they will response to me calls. During the course of rehab on this specific property, I have encounter quiet few contractors. I paid for the work in combine methods of Cashier Check, Personal Check and Zelles. With all that, what course of action would you be able to advices when doing my tax and what course of action can I take on the contractors. Sincerely thank you for your time.
Contact the contractors (via phone, email, and mail), and ask them to fill out a Form W-9. If they refuse to provide it or don’t respond, try contacting them again. This firm also is available if you would like to hire use to try and help you get their information (sometimes it takes being contacted by an attorney). If they don’t provide it, you can still file the 1099s with their information on it (but missing the SSN). Be prepared to get a response letter from the IRS asking you to correct the forms and get the SSNs for the contractors. The IRS response will also contain an IRS letter to give to the contractors saying they need to provide their SSNs.
Asking for a buddy who isn’t internet handy – a contractor did work for an overseas company and was paid by their American partner. The amount was a bit over 10k in one sum – however they never requested a w9 or provided a 1099. The contractor being busy and dealing with a lot of 1099’s simply forgot about that specific payment. He’s submitted his taxes but has since realized he forgot to add this. Since there was no request for a w9 is he safe or should he probably amend?
Generally, the IRS has three years from the date a return is filed to examine (audit) it an make changes. If there is a substantial understatement of income on the return (i.e., if the income is underreported by 20% or more), then the IRS has six years to audit the return and make changes. This is known as the audit statute of limitations (the period the IRS has to audit and make changes to a return). As long as the statute of limitations has not run, then there is a risk the IRS or state may come in an make changes to your buddy’s return.
Last year I had some caregivers working in the home through a referral agency; according to the agency contract, they are independent contractors. However, I didn’t ask them for TINs at the time and now they no longer work in my home. I recently mailed them letters asking for their TINs so that I could complete 1099s, but they are not responding. What do I do?
Send them a W-9 and document your efforts to contact them. Send them letters via certified mail, screenshot your text messages, and keep copies of your emails to them. If they don’t provide them, you can still file the 1099 without their SSNs (you would have to mail it in). The IRS will send you a notice in response that has an IRS letter to give to the contractors.
Hello im a business owner I did not get a w-9 from a vendor but I did get an employment application with ss# can I still file a 1099? this person does not want one and says they did not file a w-9 would this affect me if I still file a 1099 without a filled out w-9? I have paid them with my business check and Zelle
You can always file a 1099 late. You may face a late-filing penalty, but the penalty is relatively small compared to the possible penalties you could face if you don’t file altogether.
My Agency did not provide any W9 or official contract or paperwork when I first started as a Independent Contractor. Agency refused to provide these items when asked so I quickly saw that this was a bad decision. Left and they still owe me back commissions for 2019. How do I handle the tax situation?
From a tax perspective, you have a duty to report taxable income you receive on your return, regardless of whether you receive a Form 1099, Form W-2, or other form from the person or company paying you. So, if you received the income, report it on your return. Unfortunately, if they won’t give you a 1099 or W-2, you may have to dig through your records to figure out how much you were paid so you can report it.
If you did not receive the income, that is another issue. Assuming you are a “cash basis” taxpayer (which is the case with individuals), you report income in the year you receive it, and don’t have to report income you did not receive. There are exceptions (for instance, cancellation of indebtedness income), but these likely wouldn’t apply.
From a business or employment perspective, you may have claims to receive amounts they owe you for work you did. Please feel free to reach out to this firm if you would like to discuss further.
Hello, I am in a band that has played several shows at the same venue in 2019. Never once were we asked to complete a W-9. Honestly, in our experience, most venues don’t even bother with this. Now we are being asked to complete w W-9. We were paid for 4 shows totaling $4000 paid by check. These funds were then split between the band members using online money transfer (Zelle). My question is, since we were never asked to fill out a W-9 nor were we ever told we would be issued one, do we have to fill one out? I have already filed my 2019 taxes. Had I known this would come up I would have included it with those taxes. Also, since the money was split between the 4 of us, what needs to happen there?
A taxpayer has an obligation to report taxable income on his or her return even if he or she does not receive a Form 1099 or Form W-2. You may want to consider amending your 2019 return.
As to the other questions, if their request for a W-9 is lawful and you refuse to comply, there is a chance you could face penalties from the IRS if the company proceeds to issue a 1099 anyway. For instance, they might file a 1099 with the name of a taxpayer, and the IRS would come back and ask them to provide it, and ask them to give you a copy of the IRS letter that says you have to provide it and directing them to withhold a percentage of any future payments to you. But you bring up a good point with respect to how you divvy up the money. Depending on what your contract or engagement looked like, it might be proper for the venue to issue the 1099 to a company (if you and your band mates had a company), or one to each of you. Please feel free to reach out to us if you have any further questions.
Supposed cash payments were made to undocumented workers. Workers have no SS number or ITIN. Payor does not have full names or addresses for the workers. No 1099’s or W-2’s have been issued. This spans a period of several years. What is the best course of action?
Form 1099s are supposed to be filed at the beginning of the year following the close of the tax year in which the payments were made. For instance, 1099s for the 2018 tax year were due at the beginning of 2019; 1099s for the 2016 tax year were due at the beginning of 2017. The payer can still issue and file the 1099s for previous years, but there is always the potential that the payer could face late-filing penalties. This may be worthwhile to discuss further. Please give us a call to discuss if you would like.
As to going forward, the best course of action would be to require the payee to fill out a W-9 before he or she is paid–make it a requirement of the job (i.e., put it in a written agreement, tell them up front, don’t let them do work if they won’t fill it out, etc.). If he or she doesn’t have an taxpayer identification number, he or she can apply for one from the IRS, and it is pretty easy to do so.
Thanks for this info. I sell software as a sole,proprietor and last year I sold a copy to a financial company for about $8,000. They asked me now for a W9. I am required to give it to them?
Thanks in advance.
If it is a lawful request, the answer is yes. Whether the request is lawful depends on several factors though (for instance, did they pay you the money, did they pay it in the course of their trade or business, or was it a capital asset that you sold, etc.). Without knowing all the specifics (for which we would have to be engaged), I cannot say, but in a nutshell, if they paid the money to you in the course of their trade or business, then more likely than not it is a lawful request.
What should I do if I suspect the contractor is using an “invalid” social security number on their W-9 form ?
Document it in paper! The W-9 itself has to be signed, and in signing it the person receiving the money agrees he or she is signing it under penalty of perjury. So make sure it is signed. If you are concerned about his or her true identity, you could ask for a copy of his or her driver’s license that way you have the address on file with the state and driver’s license number in case you ever need to track him or her down. You could ask to verify it against or her social security card, but he or she doesn’t have an obligation to show you it (employees have to prove it, but not independent contractors). In all events, get a signed W-9, and make sure you comply with your obligations to issue a 1099. If it is an invalid social security number, the IRS will let you know, and will send you a letter asking you to correct it and another letter for you to give the contractor.
Does this apply to a landlord who is renting out one half of a duplex where he lives in the other half? I have one contractor who gave me an invoice and contract, did excellent work, but is now giving me static about filling out the W-9. I am new to this whole thing, and my father neglected to go over any of this with me before he passed away. My tax preparer, who also worked with my father, is the one who told me this needed to be done.
It depends on the circumstances.
With respect to rents received, it depends on whether the tenant is using the duplex to conduct a trade or business. The obligation to file a Form 1099 is based on a person or entity conducting a trade or business and incurring the expense in the course of the trade or business. If the renter is not paying the rent in the course of the trade or business, then arguably renter is not required to file a Form 1099 and has no need of the Form W-9 or information thereon from the landlord.
With respect to payments by the landlord to others, if the landlord pays a contractor to do work on the duplex in the course of the landlord’s trade or business (rental may be considered the same) then the landlord should obtain a Form W-9 and issue a Form 1099 to the contractor.
My husband died on 12/31/17 and I paid an attorney to write a contract to sell our business early in February, 2018. I didn’t realize until I was doing 1099s for contractors that I was supposed to treat the attorney as a contract employee. I requested that she send me a W-9 or at least a TIN a couple of weeks ago. She replied that she was out of the country and wouldn’t do it until February. I contacted her again and told her I had to have the information in order to file the 1099 by 1/31/19. She didn’t reply so I contacted her today by text. She again refused to give me any information until she returns next month. I understand that I’m required to file the 1099 today without a TIN, but where and how do I inform the IRS that she has refused to provide her TIN so I won’t be penalized?
I apologize for the delayed response. You can always reach out to this firm via phone or email if you are interested in discussing your matters.
While there is no guaranty that the IRS will not assess a penalty against you or the business, I suggest documenting the timely attempts to obtain the attorney’s EIN and the attorney’s refusal to provide the same. If you file the Form 1099 without the EIN, the IRS will send you a notice, and you can provide proof that the attorney would not provide it, and this may be enough to avoid a penalty.
This was the most informational post I have seen. It took me forever to figure out what to do if a contractor refused to fill out a W9 form. Thank you for the information!
How do you know the vendor is not a foreign vendor and that you aren’t required to withhold 30% rather than 24%?
If they fill out a Form W-9, they are required to certify they are a U.S. citizen or U.S. person (i.e., entity organized in the U.S.). If they are a foreign person, then they should not fill out Form W-9. Instead, they are required to fill Form W-8 or Form 8233.
I have read several excellent stuff here. Certainly worth bookmarking for revisiting.
Received CP-2100 for subs who no longer do work for the business. All information that is on file matches what the subs turned in on W-9 and what information is shown on the CP-2100 notice. What should be done by the business?
When you receive an IRS Notice CP2100, the first thing you should do is compare the error information with your business records. Check to see if the Form 1099 you filed matched the Form W-9 you received from the contractor.
Great information. I paid a contractor over $8,000 in a rip-off that should have cost no more than $3,500 to do it properly. It was a shoddy job, for which he had insisted over $6,000 up front, manipulating me with ‘the price of materials went way up,’ and if we spend time reviewing huge discrepancy with insurance, he couldn’t start right away and get done before bad weather,” while I was nearly brain dead having worked 3 overnites with no sleep (I’m over 70, and allowed his BS to overcome my normal common sense . Then after paying him the full balance without being able to see the work (225 miles away, and repeated blizzards and road closures), with incessant demands for pay-off, I stupidly caved (mid December) after he provided the itemization I demanded, (claiming 4x actual cost for materials, but I had indeed signed the ludicrous contract). I neglected to get his TIN while at the bank, so sent the required three separate W-9s which he refused to answer by deadline. Feb 1 he stuck it in my mailbox and I sent a corrected 1099 to the IRS. That was 2/3/17. Now they tell me the SS # is not a match. Ran into him yesterday and told him I just got a letter from the IRS stating such, and he refuses to cooperate. I’m not familiar with, nor could I find “Form B” that I need to repeat all this process. My tired stupidity, but why isn’t there more onus on the contractors who clearly want to avoid paying taxes on their ill gotten $$$.
My client issued a 1099 to a subcontractor prior to 1/31/18. The sub claims he never received it (all other subs received theirs). Same sub was slow to furnish a w-9. Client paid him wages in good faith that the w-9 was coming. Sub now is asking that we amend his 1099 to only include the income we paid him after the date he signed his w-9. And sub claims that we owe backup withholding on the amounts paid prior to the w-9.
I know it is encouraged to receive a w-9 for all vendors prior to making any payments, even if under $600, but is there an IRS rule on how to treat payments made prior to the receipt of the w-9?
Anyone engaged in a trade or business has an obligation to report all amounts paid to a contractor that are income to the contractor, so long as more than $600 is paid in a year, regardless of whether a Form W-9 is received and if it is received, when it is received.
A GC never delivered my form 1099-MISC even after I completed a W9 for them. I asked what actions they were going to take and they said they could file an amendment. They never followed through and now I’m not sure what to do. How do I declare the income I made without having their information? They have been unresponsive for weeks now and the deadline is only days away.
You do not need the business’s information to report income on your return. If it is Form 1099 income, you would simply report the income on the appropriate schedule and line of your tax return. While businesses have an obligation to issue and file Forms 1099, this obligation is completely separate from a taxpayer’s duty to account for and report income on his return. In other words, it is your job to keep track of an report income even if you do not receive a Form 1099, and it is a business’s job to issue and file a Form 1099 even if you do not report the income on your tax return.
what if a client asks for a w-9 to be filled out for them after you filed your taxes; they are asking in April, so really freaking late and I don’t want to pay any more to have my tax person fix anything because of this lateness. I also don’t want it to appear to the IRS, with a looming 1099 yet to be issued, that I made more when it was already claimed. I have already accounted for the money I received from this client on my return to the IRS.
All taxpayers have an obligation to report income on their returns, regardless of whether they receive a Form 1099 for the income or whether the Form 1099 is timely received. If a taxpayer knows he earned income, he has to track and report it on his return. If the taxpayer fails to do so, he may face an audit or having the IRS make changes to his return later if a Form 1099 is filed. In addition, the taxpayer may face penalties for not reporting the income in the first place. Depending on the particulars, the taxpayer may be better off amending the return to report the income and pay the additional tax due than waiting until after the business files a Form 1099 and the IRS to identifies the discrepancy.
I’m working as a freelancer and was contracted to work with a small business. Turns out they did not submit my completed W9, and while we have written communication agreeing to the amount they have paid me for last year, she refuses to provide her ID number (either her EIN or SSI). Our tax software is asking for this information. They said they needed time to find the number, and refused to provide the SSI. They paid me through their personal account, not business account. When I made clear that I was done waiting on them to do their due diligence, I was fired in response. They say they’re not going to include my payments in their taxes and say to consider the money paid to me a gift. I will need to file for this year and next as well.
If the amounts paid to a recipient as a contractor are income (as opposed to non-income items), the recipient has an obligation to report them as such on the recipient’s income tax return and pay any tax thereon, regardless of whether the recipient receives a Form 1099 from the payor. If amounts paid to a recipient truly are not income (for instance, they are a gift, or other non-income payments), the recipient may not need to report them on the recipient’s return.
We suggest retaining a tax attorney to advise you as to the particulars of your situation. (We are not able to provide specific legal advice to anyone who is not our client and without further information.)
Joint Commissions account for 2 individuals. The commission payor paid Party #1 & Party #2 directly 50% of the commissions thru the year. At the end of the year, the company issues a 1099 to only Party #1 for ALL commissions. They are stating they only had a W9 on file for Party #1 completed and will not correct the 1099 reporting 50% commissions to each person.. For Party #1 to issue a 1099 themselves for party #2. Party #1 that received the 1099 for the full amount of commissions does not have the SS# of the other party to issue a 1099 and party #2 wont give it to them..
Who paid the commissions to Party #2? If company paid the commissions to Party #2, then Party #1 has no obligation to report the amounts paid to Party #2 to the IRS unless company was paying them to Party #2 on Party #1’s behalf with funds belonging to Party #1 (for example, a situation where this might be the case is if an attorney uses funds in his client trust account to pay his client’s contractor).
The parties should look to their respective contracts or agreement with company and with each other (if any), as well as state law to determine their respective interests in the commissions and the joint account.
My company issued a Form 1099-MISC for 2017 to an independent contractor for nonemployee compensation. It was timely issued by 1/31/18, and also filed with the IRS. On 2/13/18 my company received an email from the contractor requesting that we issue a corrected 1099-MISC because we used an “old” TIN. A new Form W-9 dated 2/1/18 was attached (He now has an EIN for his Subchapter S LLC). Is my company required to correct the 2017 1099-MISC? Or can/should we just use this new Form W-9 for the future?
Whether your company has an obligation to correct the Form 1099 depends on all the facts and circumstances, and looking to your company’s records and documentation should help answer your question.
If there was a contract, your company may look at the contract to see who your company was required to pay, and/or whether the contract or payments were properly assigned from contractor to Subcontractor S LLC at any point. Also, look at to whom the payments were made. If your company properly made the payments to contractor instead of Subcontractor S LLC (as opposed to your company improperly making the payments to contractor when it should have made them to Subcontractor S LLC), absent a contract or agreement that provides otherwise, it would follow that your company should issue a Form 1099 to contractor because contractor was the recipient of the payments. In addition, look at invoices and correspondence from contractor or Subcontractor S LLC relative to payment. If contractor issued invoices, and payment was made to contractor in response, it follows that the Form 1099 should be issued to contractor. If invoices requested payment to Subcontractor S LLC, it follows that your company should have paid Subcontractor S LLC and issued a Form 1099 to Subcontractor S LLC (unless there is a contract basis stating otherwise).
I technically worked for a nonprofit that I was the sole employee of. But after failure to pay me our agreed upon wages, I left after two months and started my own sole proprietorship. I am being asked to fill out a w9 as I know is technically how it would work since I was paid over 600, but I do not trust the party with my ssn and do not feel I worked for them because they did not reach the agreement of the contract. Do I still need to provide info? I just want to move on and not be audited…
I’m a sole proprietor. I did work for a GC in 2016 and 2017. I’ve done 8 projects with him in the 2 years and he never asked me for a completed W-9. I received a text message from him on February 11, 2018 asking me for my tin for the 1099. I always include income received from all work I get paid for but shouldn’t he have not only requested a w9 before work commenced and as a payer doesn’t he have a deadline of January 31st to issue it? Can I report him to the IRS?
The deadlines to file Form 1099-MISC and furnish a copy to the recipient depends, on part, on what payment is being reported on the form. For the 2017 taxable year, the deadline to file Form 1099-MISC reporting non-employee compensation in box 7 was January 31, 2018. For all other reported payments, the deadline to file Form 1099-MISC is February 28, 2018 (if filed on paper) or April 2, 2018 (if filed electronically). A payer can get an automatic 30-day extension of time to file by filing Form 8809 by the due date of the returns.
Generally, the deadline to furnish Form 1099-MISC to the recipient is January 31st or, only if payments are being reported in box 8 or 14 thereon, February 15th. A payer can also request an extension of time to furnish statements to recipients by following the instructions provided by the IRS for doing so.
There is nothing in the Internal Revenue Code or Treasury Regulations that requires a contractor to fill out a Form W-9 or a payer to request a contractor’s TIN before the contractor commences work or before the payer pays the contractor. Rather, the statute requires the payer to issue and file Form 1099 by a certain deadline. So, theoretically, the payer could ask the contractor to fill out Form W-9 after a job is complete or after payment has been made. That said, this is not necessarily the best business practice for a payer to wait to request the Form W-9 because the payer may face hurdles in obtaining the information from the contractor in a timely manner.
While a payer does have a deadline to file and furnish the Form 1099, the payer’s failure to meet this deadline is on himself, and he may be penalized by the IRS for late filing. The late-filing penalty is likely to be less than penalties for failing to file altogether.
If you choose to report the payer to the IRS for a suspected failure, and whether the IRS will take action thereon, depends on what is reported and whether the payer actually did anything wrong.
Through revisions to the laws over the years the IRS have made whistleblowers out of virtually everybody. Each time you send someone a 1099 and report it to the IRS you are essentially saying, “Hey IRS! This person made xx amount of money from me. “. This gives the IRS the data necessary to quickly identify when people are not reporting all of their income.
Sure, tax cheats don’t need to cheat on their taxes, but I also think there is such a thing as government having too much power. Just how much data does the IRS need to collect from everybody? In my opinion their lawmakers need to drastically reduce and limit the amount of data that the IRS can collect and hold on people.
They say USA is a free country, but I beg to differ when the government is allowed to assign social security numbers to every living person, collect data on them, and track them for their entire life.
That’s slavery, not freedom.
What is the procedure when the payee is now deceased and there is no estate to provide the information? I paid a subcontractor for work and he died (according to another person who knew him).
If the payee had assets that did not automatically transfer upon his death (for instance, property he owned in his name, or a bank account), generally someone who was related will step up to become the personal representative. That person would be responsible for filing a final return. I suggest contacting his family to see if he had a will or to see if whoever took charge of his affairs will provide the information you need. If there is no family member who is willing or there are no estate (no probate proceedings), there is likely a state statute that provides directions on how an interested person (for instance a creditor, a friend, a family member, etc.) can commence estate proceedings and ask to be appointed as a personal representative or have the court appoint someone else.
I hate to put it this way, but I did some work for an entity which was supposed to be cash so they received a substantial discount. Now they are asking for a w9. I have already filed my taxes for this year an this will be a substantial hit. What happens if I deny there request?
If the payer’s request for Form W-9 was lawful and you refuse to provide an executed Form W-9, the payer may still file an incomplete Form 1099 with the IRS. If the payer does that, the IRS will likely contact the payer to complete the form. If the payer are unable to do so and informs the IRS of your refusal, you may be exposed to potential liability to the IRS. You may be penalized for failing to provide the Form W-9 to the payer, subject to backup withholding, or face additional exposure, for instance, if the the IRS were to audit you and discover you did not report your income.
What if the contractor refuses to give you their legal name, address and TIN?
If you have information at your disposal to obtain some of the information (for instance a legal name or address), you may consider doing so. For instance, if you have a phone number, you could try and perform an online search to see who it belongs to (legal name). If you have an obligation to file and furnish Form 1099, the contractor’s refusal to provide accurate information should not stop you from filing and furnishing the same. That said, if you file an incorrect or incomplete form with the IRS, you can anticipate the IRS will contact you and ask you to correct the form. In order to avoid penalties for filing incomplete and/or inaccurate information, you should show the IRS your attempts to obtain the correct information from the contractor before you filed the Form 1099, and again thereafter.
Great post! Have nice day !
I have used an independent contractor and paid him about $100,000 for work. He refuses to fill out a W9 and has told me that he wants me not to list these payments as a deduction because he did not report the payments on his tax form. Naturally I refused. Can I file an IRS Whistleblower suit. Is that worth doing. How can I compel him to provide his TIN.
Whatever you do, I suggest documenting your efforts to obtain his/her TIN. You can still file a 1099, but be prepared to respond to the IRS if the IRS comes back to you and informs you the 1099 is missing information. This is where the documentation can come in handy. It might be helpful to send the contractor to my blog so he/she can see some of the penalties that he/she may incur for failing to provide his/her TIN.
Do you believe that a contractor who has been paid “$100,000 for work” will care about a $50 penalty for failure to furnish a TIN?
A contractor’s liability may not be limited to a $50 penalty. For instance, if a contractor refuses to provide the information, he may be subject to 28% backup withholding. If the IRS looks into a refusal, it may also audit the contractor. Even if the contractor is properly reporting all the income received, an audit isn’t likely to be “free”–there is often time and expense involved therein.
I was used as an “employee on trial for 3 months” but after two months I was fired. Now my previous “employer” is trying to bully me into providing my social security number to a company and person I have never heard of, what do I do??
If you were an employee, the company for which you worked should have had you fill out a Form W-4 when you started working and should have verified your SSN and employment eligibility. If you provided this information to your former employer, your former employer can use this to fill out and issue you a Form W-2. If you were not an employee, and instead were a contractor, you may need to provide the company a Form W-9 so it can issue you a Form 1099. You do not have an obligation to provide your SSN to a third-party, however, and the company has an obligation to keep your information confidential and only use it for proper purposes (although the company if the company uses a payroll processor or hires someone else to file and furnish Form 1099, it may provide your information for these purposes).
What if you do not trust the business with your social security number. In my case the business is one person and they have behaved unlawfully in the past…
First, I am not aware of any cases where distrust of the person requesting a social security number excuses a refusal to provide the social security number upon the person’s lawful request for the same. If a payor lawfully requests a payee’s social security number (i.e., the request is for proper purposes), and a payee refuses to provide it, the payee could face penalties under the Internal Revenue Code. Accordingly, by refusing to provide your social security number, you risk exposing yourself to liability under the Internal Revenue Code.
Second, there are several laws that address misuses or unauthorized disclosure of a person’s social security number. If you look at Form W-9, it says the following: “Misuse of TINs. If the requester discloses or uses TINs in violation of federal law, the requester may be subject to civil and criminal penalties.” 42 U.S.C. § 408(a)(8) prescribes penalties for whoever ”discloses, uses, or compels the disclosure of the social security number of any person in violation of the laws of the United States.” Many state laws (in addition to federal laws) restrict the disclosure of SSNs in various circumstances. In addition, there may be grounds for civil liability to you, for instance if a tort were committed. While laws against disclosure and potential criminal and/or civil liability may not deter the person requesting your SSN from disclosing or misusing the same, the person may think twice before doing so.
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My landlord refuses to sign a W-9 for a charity that will pay half of our rent. She said she doesn’t do W9’s because they’ll have to pay taxes. do I wonder if a stern legal letter would convince her to comply.
Seriously, there is no requirement to provide a TIN to anyone. The requirement is on the Payor to obtain it, IF POSSIBLE. The IRS cannot unconstitutionally force you to do its tax collection efforts. Jeeze. Why is there so much dis-information about taxes out there?
The requirement that a payer obtain a TIN is separate from the obligation for a payee to provide the information. There is no “IF POSSIBLE” language in the Internal Revenue Code or the Treasury Regulations. Please review section 6109(a)(2) and (3) of the Internal Revenue Code and the accompanying Treasury Regulations. To wit, Treas. Reg. § 301.6109-1(b)(1) specifically states that “[a] U.S. person whose number must be included on a document filed by another person must give the taxpayer identifying number so required to the other person on request.”
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