1099 New Rule?

[Taxizen]

One of my clients got issued a new FEIN since the bank required him to have one even though he runs the business as sole proprietorship.

The bank officer obtained one for him at the bank. He was told that the taxpayer should not issue 1099 to self contractor with individual social security number. Is this correct?

I couldn't find any update about this on IRS web site.

Any input would be appreciated.

[kcjenkins]

That is correct. The IRS now wants all 1099s to use an EIN, not an SSN.

[JohnH]

That's interesting.

So I wonder why the W-9 still has a place for the SSN.

[Taxizen]

One of my clients got issued a new FEIN since the bank required him to have one even though he runs the business as sole proprietorship.

The bank officer obtained one for him at the bank. He was told that the taxpayer should not issue 1099 to self contractor with individual social security number. Is this correct?

I couldn't find any update about this on IRS web site.

Any input would be appreciated.

Would you inform me where I can check on that?

Thanks.

[jainen]

>>I wonder why the W-9 still has a place for the SSN.<<

I wonder why anyone would WANT to give their SSN to their business associates.

[JohnH]

Beats me too.

But I know someone who deals with hundreds of contractors (independent truck drivers) and I'll bet over half the sole proprietors list their SS# on the W-9 (some with a FEI# and others without). Of course, that also begs the question of why an independent trucker would want to operate as a sole proprietor in the first place.

[kcjenkins]

Well, as to the W-9, that is a form requesting an identification number, so it could be a request to an individual or to a business. The IRS wants payers to give them a way to match up income, so they don't care whether you are reporting a payment to an individual or to a business. Indeed, for matching purposes, the instructions say that they PREFER that the recipient use his/her SSN.

However, they prefer the business that is reporting the payment to use their BUSINESS EIN, if they have one. If you look at the instructions for the 1099-Misc, it says, on Page 18, Instruction K, "The TIN for filers of information returns, including sole proprietors and nominees/middlemen, is the federal EIN."