Worker refuses SS Number

[Bonnie]

I have a customer who is doing contract work putting up gutters and he receives a 1099. He also has some people who work for him and needs to issue 1099's to them. He has had them sign all year long for the money they received. Today my customer calls and says one of the men who works for him is refusing to give their SS number. My only question was why did you let him work without getting the SS number first and the answer was "Well, it was a friend who he had known for a long time and trusted." M question is what can my customer do about this if anything. Is there a way to issue the 1099 without a SS number? I don't normally do returns with someone needing to issue 1099's so have never run into an issue like this. Thanks in advance for any help anyone can give.

Bonnie

[sea-tax]

Bonnie, not the formost expert on 1099's as I have a staff that prepares these for me. But if I recall you can have your client let his subs know that without a SSN he will be required to withhold 25% for taxes from every check and pay it to the IRS directly.
I think the % is correct it may be 20% you can find it in the 1099 pubs.

As a side note is your client sure that these people should be getting 1099's and not w-2's?

[Nashville]

Prepare a 1099

SeaTax, Bonnie is from KY. I don't know how things are on the Left Coast, but in the mid-South, almost no one in the construction industry does business on a W-2 unless the company is very large. A guttering contractor more often than not is operating out of the back of his truck. In many cases, a W-2 is actually proper, but it will never happen unless IRS gets auditors off their butt in their office and onto the jobsite.

Every year I issue 1099s without a number. I tell my clients year after year I won't deduct any such expense unless the recipient receives less than $600 unless a 1099 is issued.

IRS comes back and wants the numbers, and THEN clients get concerned. They somehow arrange to get numbers that they couldn't get before, and occasionally, there are some guys that leave town and client ends up paying a penalty.

Bonnie, "backup" withholding at 28% will force the issue with this guy. Most likely, he will give your client a false social security number to avoid the backup withholding, but a false number will not be caught for a year or two. I would advise the client to have the guy sign a W-9 ID form so the client is off the hook for being accused of colluding on the false number. (Effectively, the W-9 serves the same purpose for a 1099 that the W-4 does for a W-2, except there is no withholding.)

More than likely, this guy is avoiding tax, avoiding child support, avoiding detection by workers' comp insurance people, or drawing disability and doesn't want to get caught working under the table. Sometimes these people will work for $6/hr when normally a contractor would have to pay $12/hr, and for the economic benefit the contractor becomes an accessory to this type of action.

[taxea]

SSN's can be verified through the SSA if the business payroll person or bookkeeper registers on the site. W-9's can be verified prior to hiring of the subcontractor to insure it is not a fake. I only wish the SSA would include qualified tax preparers on this site. You might want to check it out to see whether you client's company qualifies to use this site. taxea