FORM 1099

[TAXMAN]

Going over TP books found he did not issue 1099's. Received all ssn#'s but one who refuses. What do you do in this case?

[Catherine]

File what you've got. If the missing SSN is less than 25% of the total, you can still e-file. Else you'll have to paper file.

The penalty for NOT filing can get steep, fast. I've never seen it imposed on someone who did file (and one of my clients always lollygags on getting me info; I got his 2011 info in Nov 2012), but the possibility is there and gets worse the more time goes on. Get 'em filed.

What the client should do is tell the stone-waller that s/he will get NO more payments until that TIN is received.

[Margaret CPA in OH]

I have prepared them anyway and alerted the client that late filing notices would likely be forthcoming. When I still paper filed, I would put Refused in the tin box. Now I tell the client that it is no longer a business deduction and remind them - again - not to pay the first dollar until W-9 is in hand.

[Catherine]

Margaret's advice is good -- no one should pay a dollar without that W-9. But we know our clients, who want the work done now and figure they'll get the W-9 later. Then they forget when the vendor wants their check (also now).

For one client who just kept paying and paying and paying one contractor, I changed the "pay to" line in their QuickBooks file for that vendor to read, "No more checks until TIN is obtained!!" The office lady didn't know how to change that back. Tee hee. They got the TIN.

For some folks, having your client tell them "we WILL file this 1099 and the IRS will come looking for you" gets them to comply.

[Jack from Ohio]

28% backup withholding if TIN is not supplied. This is the rule.

[TAXMAN]

I know this but I found this after the fact and that the contractor(self employed) had already been paid. I think maybe some underreporting going on. Just my thought. I still think TP needs to issue 1099 and put refused in the slot and paper file. Better late than never would you agree. I read on another post that an auditor made it clear you want the deduction issue the 1099. even late.

[Pacun]

I had an audit and we issued a 1099-misc at that point and there was no penalty and the deduction was granted.

[Margaret CPA in OH]

The contractor audit (became a client after that) ended with refusal of about $20,000 in sub payments because the contractor not only did not have the tin of the subs so couldn't write refused but also did not have addresses.

I do think most of us know about the 28% withholding but, in my experience, those checks have been long gone without it or the W-9. The person often writing the checks may not know to withhold. An ongoing problem many times solved only with an audit and denial of the otherwise proper deduction. It can really hurt a business bottom line.