A business is required to issue a 1099-MISC form to an independent contractor (because they were paid $600 or more) for services under Code Sec. 6721(a), (b); Reg. §301.6721-1(a)(1). However, the business does not have the recipient's address nor social security number. Is a 1099-MISC form required to be filed even with the missing information? The Code and regulations do not seem to clearly address that.

Would the IRS assess a penalty for failure to file a correct (complete) information return on or before the date, if the return was incomplete? Can an incomplete 1099 form even be electronically transmitted? Presumably the maximum $50 per return penalty would apply? If the taxpayer does not have the correct information now, it probably never will.

asked 06 Jan '11, 06:44

Bill-EA's gravatar image

Bill-EA
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Yes still file it, will be a $50.00 penalty for not having the information. No you cannot efile them without full information; need to paperfile them.

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answered 06 Jan '11, 18:11

SandySea's gravatar image

SandySea
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accept rate: 7%

Thanks Sandy, that's what I thought.

(06 Jan '11, 22:48) Bill-EA

Sandy, I question the paper filing requirement - the FIRE system will handle all blanks in the payee TIN field, for example. See Pub 1220. Address fields are required and I suppose that the software will reject forms that do not have something in the field, but something could be put into the field - for example, make the address "in care of" the payer. The payer reports what the payer has - and the payer is going to be holding the payee copies of the info return for four years or until the correct address is obtained.

The penalty is now $100 per incorrect return (Small Business Jobs Act of 2010). Also, the payer may be subject to failure to withhold penalty (28%) for not obtaining the TIN and failing to backup withhold. Incidentally, failure to timely furnish payee copies also carries a $100 penalty. Both failure to file correct returns and failure to furnish payee statements are graduated from $30 per return to $100 per return depending upon when the situation is corrected. This could be a somewhat costly lesson for the payer.

Bill, Re:"If the taxpayer does not have the correct information now, it probably never will." The payer has a procedure to follow to establish reasonable cause for not having the correct information - including initial TIN solicitation and first and second annual solicitations and "B" notice requirements if applicable. This is not a matter of "If we don't have it by now we will never have it" but a matter of making a good faith effort to obtain the information by following the procedure.

If the payee is actually in a business (independent contractor) rather than an employee, then there must be some way to locate the person. How was this person hired in the first place? The situation as described suggests it may be more like a situation we have locally where day laborers congregate at a particular street corner and people hiring day laborers know to go there to hire people to work. It seems likely such day laborers are actually employees and not independent contractors. If that is the situation, that is a whole 'nother can of worms.

The important thing is what has the payer done to obtain the information and have those efforts been documented? If nothing has been done, and the hands are thrown up with "Well, if we don't have it now, we probably never will", then the payer probably will get hit with penalties.

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answered 13 Jan '11, 05:49

Pat%20Haggerty's gravatar image

Pat Haggerty
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Pat, the statement that if the business does not have it, that it probably never will -- refers to the fact that the penalty increases over time. But time is unlikely to help locate these independent contractors that are individuals.

(13 Jan '11, 06:20) Bill-EA

The business will be fined if they did not have the employee sign a 1099-Misc with the appropriate information prior to them making their 600th dollar.

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answered 31 May '11, 05:54

Rick%20Jones's gravatar image

Rick Jones
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-1

The business has already violated the rules, and can no longer bring itself into compliance, regardless of what it does now.

A business that uses independent contractors absolutely must, without exception, get their information before they earn their 600th dollar, and terminate their services as soon as (or before) they earn the 599th dollar, if they refuse to provide the information.

Regardless of whether or not the 1099 is issued, the business acted wrongly by allowing the person to continue working, without first providing the information needed for the 1099.

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answered 17 Jan '11, 05:02

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stephenweins...
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Asked: 06 Jan '11, 06:44

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Last updated: 31 May '11, 05:54