1099 Refusals

[Black Bart]

Here,

How does the tax withheld from payment to an independent contractor be reported and remitted to the IRS?

Does it go to line 3 of Form 941 like the W-2 wages withholding?

If that's the case, does the payment to the independent contractor has to be added to line 2 also?

I think:

www.irs.gov/pub/irs-pdf/f945.pdf

[Questionguy101]

Form 1099 withholding

How does the tax withheld from payment to an independent contractor be reported and remitted to the IRS?

Does it go to line 3 of Form 941 like the W-2 wages withholding?

If that's the case, does the payment to the independent contractor has to be added to line 2 also?

[JohnH]

I'd think this would be necessary as a purely practical matter. Probably a little box somewhere on the invoice/statement similar to the "Remit to" box we often see when a business uses a separate address for payments or lock box. Over time, an informal standard for this info would probably evolve, just so everyone would know immediately where to look. Sure would be preferable to responding to hundreds or thousands of W-9 requests at year-end, so most businesses would probably follow the lead.

In my other business, I sometimes invoice hospitals, universities, and government agencies. I have a box on my invoices which provides the W-9 info and my vendor number because I know they will contact me to say they can't process the invoice without the W-9 info. The number of those contacts has decreased considerably since I began doing this several years ago.

[joanmcq]

The thought of invoices having the EIN is possible. Look at how easily child care providers started putting the EIN and other relevant info on the documents they provide for our dependent care credit clients.

[taxmandan]

It only matters if the business is audited, then 1099s like mileage logs and receipts will have to be produced. The massive amount of both electronic and paper information will overwhelm theIRS. They will be complicit for awhile in not chasing down the non-filers of 1099s except for audits. Businesses will comply about as much as they do for mileage deductions.

[Black Bart]

Indeed

...requirements could be enacted similar to the requirements for contribution receipts (if no timely 1099 is issued for expenditures over a certain threshold, no deduction allowed. And no opportunity to file late) THAT might be a game changer...

that WOULD be a game changer and I sincerely hope something like that does not materialize. Right now I plan to ask about 1099s, but will not refuse to file without them. If your scenario comes up then most of us here (I think) would insist on seeing or making the 1099s, but there are many preparers out there who would not...and we would lose a large number of our clients to them.

Because 1099 enforcement would likely be lax (like now), then probably nothing would ever happen to those who don't make them. After a few years of this we'd be known as those people who insist on all that useless paperwork just to make some money.

[MAJ]

Online transactions and such

I thought I heard some time back that the online vendors (paypal, ebay, etc) must also start sending out 1099's to the people who are doing sales. Did anyone else hear about this. That'll also be interesting..

[JohnH]

There are other possibilities, you know. For example, requirements could be enacted similar to the requirements for contribution receipts (if no timely 1099 is issued for expenditures over a certain threshold, no deduction allowed. And no opportunity to file late) THAT might be a game changer.

I'm not saying this would happen, but we need to keep in mind that in the future the government is going to be increasingly revenue hungry. They may devise all sorts of additional ways to legally steal from us. Setting virtually everyone up for failure in a cumbersome system is very appealing to lots of bureaucrats. Efficiency & common sense are the least of their concerns.

[Black Bart]

To a large extent

this law will simply be ignored.

Look at how much trouble it is now to get your customers to round up info for their present dozen or so 1099s. Jack that up to an average 50 phone calls/contacts and...many of them will balk -- they simply won't do it. Likely response: "You want me to run down 50 guys and get tax info from them? Forget it -- I'll take my chances. You won't do my taxes unless I do? Goodbye!"

And very likely nothing will happen to those who do that. How many actual penalties have your clients ever paid for not making 1099s? While a few of my clients have paid fines for late filing of 1099s, the only ones that have ever been fined for not making 1099s are those who were being audited for income tax -- otherwise it never comes up.

Point being that IRS is not capable of checking up on the stuff due at present, much less running down another 50 jillion pieces of paper. They're simply banking on voluntary compliance and they'll get a lot, but I'm not seriously worried about them ever knocking on my clients' doors to inquire about hardware store payments.

Actually, if I was a client faced with either spending my business time making money or tracking down 50 numbers (and I believe the large majority of this stuff is a complete waste of time), I'd probably do the same.

[Snaggletooth]

If it happens

If it doesn't get repealed then I'm going to hire an assistant in January, 2013. And bill her out accordingly. But see the client's verbiage from the original post:

a) I've already done them and sent them out (joke).
b) I'll let someone else do my taxes.
c) I won't file.

[JohnH]

If it doesn't get reversed, I'm betting that virtually all businesses will start printing their relevlant info right on their invoices and statements because they won't be wanting to process all those w-9 forms from their customers. Seems like the logical rhino to do.

I also wonder if "service bureau" - type companies may spring up specializing In filing 1099 forms. Build a large enough data base and you could handle 90-95% of most anyone's needs. this might even be a stand-alone business opportunity.

[erchess]

Interesting

My clients mostly pay business expenses by credit card anyway and the amount of that will go up. For expenses paid by check or cash I will insist that they: give me copies of their 1099s; sign a statement that they prepared their own; or pay me to prepare them. I'm not expecting a huge hassle over this issue. By the way, what do people charge for 1099s? I charge $25 to set up a company in "that program" and $5 each for the first ten and $3 each after that.

[S T]

At least one year

Well at least we have about a year to prepare, In the meantime, I am sending W-9 forms to all of my business and rental clients, (probably forgot someone in that statement) and at least obtaining information, whether or not it needs it for the 2010 filings.

Could be fees, but also a lot of work and compliance.

Sandy

[BHoffman]

I betcha this thing gets repealed. If not, then I intend to start cranking out 1099 forms and charging a fee for it. Would rather spend my time doing something more productive, though.

[joanmcq]

I pay by CC anyways and advise my clients to do the same. Biz card. The audit trail is much easier that way. No getting copies of cancelled checks, etc.