Client is a schedule C (not an LLC) and files Sch C activity each year under her social security number. In 2022, she hired a contractor to do some work exceeding $600. Client wishes to provide a 1099 to the contractor. However, client have never applied for a federal tax ID number. It appears that the client will need to issue the 1099s using her social security number as the PAYER'S TIN on the document. I suppose the client could apply for a Tax ID number and use it on the preparation of the 1099s? Proceed with social security number or apply for new TID?
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Are you asking what is allowed, or what is good practice?
Yes, it is certainly allowed and maybe even normal for a sole prop to use the SSN for payer TIN. See the form instructions.
One concern I have is whether an EIN issued in 2023 can be used on a tax year 2022 filing. I know this can be a problem for W-2s, not sure if it also applies to 1099-NEC.
As a practical matter, the risk seems pretty low here. Presumably she has some trust that the contractor is not a thief, and in fact simply knowing someone's SSN is not guaranteed to lead to identiy theft. Or put another way, if the only defense against identity theft is trying to keep the SSN secret, that's a pretty weak defense."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard -
I would apply for a FED ID # today and use it on the 1099s. There is plenty of time before the 1099s need to be filed and the IRS matching to the FED ID on the 1099.Last edited by BOB W; 01-12-2023, 03:14 PM.This post is for discussion purposes only and should be verified with other sources before actual use.
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