IRS imposes $50 Penalty (to you?) if your 1099-MISC/S is missing Contractor's SSN/TIN

13 Replies

  1. apparently in all of USA, per IRS.
  2. thus all the more reason to REQUIRE, per IRS, of all your contractors/subs, their corect SSN/TIN, as a condition of hire.
  3. what should be used to request it, litigiously, then? a W-9 form as part of the hire package?
  4. since they might fail to fill it out, on the premise they're an indie not an employee, i'd probably then go as far to write into the contract that the independent contractor cannot be paid per IRS, wihout an W-9 certifying their status as a payee.

OK, you require the completed and signed W9 upfront. That should do it, although the tax ID or SSN can be fictitious - but not your fault. And part of the "coercion" to complete is that you are required by IRS to backup withhold something like 30% of total to be paid if you do not get the W9; telling that to contractor should be sufficient to get the W9.

I have sent out 1099 missing tax ID in the past, many years ago. IRS sent a letter that basically said don't do that again. So I try not to :)

Ok thanks Steve I'm thinking is it okay to stipulate in the work agreement that if contractor provided incorrect SSN/TIN or it was omitted then they will be liable for any and all witholding and/or fees assessed by IRS for the error/omission?

While technically you are supposed to send a 1099 to someone you paid more than $600 a year on a rental property, or you will owe up to $100 per missing 1099 document penalty. But IRS almost never assesses this penalty on small landlords doing renovations. If you are intentionally paying someone under the table, maybe a property manger at a complex, then you could owe $250 for intentionally not filling. The penalty is really designed for big businesses like Home Depot who have thousands of independent carpet installers, ect. Also you're not required to send 1099s to corporations. Many small businesses are S corporations. Limited liability companies "LLC" can file as an S corporation, so LLC are kind of a grey area of the law.

Originally posted by @Cameron Skinner :

While technically you are supposed to send a 1099 to someone you paid more than $600 a year on a rental property, or you will owe up to $100 per missing 1099 document penalty. But IRS almost never assesses this penalty on small landlords doing renovations.

Most landlords are exempt from this requirement and would not have to issue a 1099, so there wouldn't be a penalty. 

i use 1099-MISC as a token preventative measure where an independent contractor (ie, plumber, painter, etc) earns $600/yr or more in projects in case they or any of their subs/helpers should ever use the rental property address and/or my name as a place/employer they were 'employed' at for an albeit desperate unemployment claim.

I would advise you to consult a tax attorney or accountant regarding these issues. As a tax attorney who specializes in information reporting and withholding, I would not recommend you get advice on these issues from an Internet forum. The IRS can and will penalize you for errors, including missing TINs. (If you don't have a TIN BEFORE you make a payment, you as the payer can be liable for 28% of the amount paid plus penalties for failing to timely deposit backup withholding, interest, and penalties for incorrect reporting.)

hence the topic stating IRS imposes a penalty if 1099 missing SSN/TIN

 i am asking  what should be used to request it,  a W-9 form as part of the hire package?

i can see how that can be construed as 'asking for tax advice' although, what i am asking, to reiterate from the OPost, is  how to hire a contractor in a way that avoids an error/omission in the SSN/TIN?

Require a W-9 with contract signing, and most certainly before they receive their first check.

My comment was not directed at you, as much as it was directed at those giving poor advice. You can certainly use a Form W-9, which is a good practice. You don't need one if the name of the business includes "Corporation", "Corp", "Inc.", or "Incorporated".

You don't have to use a W-9 to get the TIN either, you can just ask for the TIN and record the number along with the date on which you got it in your records. Just make sure you get it before you ever make a payment. Getting a signed and dated W-9 will definitely help if you ever are audited though.

An LLC is not in any "gray" area... You either need a W-9 indicating that it is taxes as a corporation or you need a TIN.

I would also recommend you review Publication 1586 for a good description of how to avoid penalties for incorrect and missing TINs. Keep in mind, that you must backup withhold at 28% on payments if you do not have a TIN in your files at the time you make the payment.

Originally posted by @Cameron Skinner :

While technically you are supposed to send a 1099 to someone you paid more than $600 a year on a rental property, or you will owe up to $100 per missing 1099 document penalty. But IRS almost never assesses this penalty on small landlords doing renovations. If you are intentionally paying someone under the table, maybe a property manger at a complex, then you could owe $250 for intentionally not filling. The penalty is really designed for big businesses like Home Depot who have thousands of independent carpet installers, ect. Also you're not required to send 1099s to corporations. Many small businesses are S corporations. Limited liability companies "LLC" can file as an S corporation, so LLC are kind of a grey area of the law.

 Actually, HD doesn't have thousands of 1099s like carpet/cabinet installers, they actually hire one cabinet installing company to do it for them the required insurance is 2M/5M Liability among others, its a whole new different discussion. 1099s are used by most small businesses like part time bar tending, and large businesses who doesn't want to maintain more payroll, like a construction manager, project manager, tax consultant or legal consultant if they aren't incorporated.

Originally posted by @Stephen Chittenden :

My comment was not directed at you, as much as it was directed at those giving poor advice. You can certainly use a Form W-9, which is a good practice. You don't need one if the name of the business includes "Corporation", "Corp", "Inc.", or "Incorporated".

You don't have to use a W-9 to get the TIN either, you can just ask for the TIN and record the number along with the date on which you got it in your records. Just make sure you get it before you ever make a payment. Getting a signed and dated W-9 will definitely help if you ever are audited though.

An LLC is not in any "gray" area... You either need a W-9 indicating that it is taxes as a corporation or you need a TIN.

Spot on! There are some advice that contradict a lot of IRS publications, some think 1099s is an easy way out to evade taxes or perhaps make their life easier, short term happiness for a long term problem. I agree with the grey area, that's why I dont like LLC, its the same yearly maintenance cost anyway.

I'm wary of asking anyone, whether they be a prospective tenant or prospective contractor, to just give me their SSN or TIN without a form spelling out why it is needed. W-9 suits the purpose and i can issue the 1099-MISC based on the info on it as well as have a record as to why i put 123-45-6789 on the 1099 in case IRS wants to fine me for putting the 'wrong' #

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