I have a client who pays rent to a vendor that we are pretty sure is a sole prorpietor and therefore should recieve a 1099-MISC. My client has sent him a W-9 and followed up several times, but the vendor won't provide the W-9 or even his Tax ID. What are my client's obligations in this case? Should he just not prepare a 1099 and if the IRS catches up with him explain that the vendor refused to provide a Tax ID or W-9? Should he institute backup withholding on future payments (still an issue if he has no Tax ID to report them under)? From what I read, all of the obligation to collect the information required to produce 1099s is on the shoulders of the payor, with no corresponding obligation/penalty for the payee to ever provide the information!

asked 11 Jan '10, 18:07

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Steve
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I had a client with the same problem,she contacted the IRS and expained the situation they told her to report it anyway and fill out a substitute 1099misc when filing add an explanation.

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answered 12 Jan '10, 00:22

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Baadja-Lyne
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It sucks to be you in this case.

The IRS web site at http://www.irs.gov/efile/article/0,,id=98145,00.html says that you have to start backup withholding immediately on required payments if the payee refuses to supply you with a 1099.

This could put you in a lurch - if you start backup withholding your landlord may not take too kindly to it. While it is clearly illegal, I've seen landlords turn off the water, turn off the electricity and I even know of a case where a landlord actually removed the entry door when he didn't get what he wanted. While it was all illegal it is still a mess to deal with.

You also have to be absolutely sure that your payments are reportable and should go on a 1099.

If I were in your place I would the IRS page from http://www.irs.gov/efile/article/0,,id=98145,00.html and mail it to the landlord along with your next payment check and another copy of Form W-9, along with a short note saying that if he fails to complete the W-9 and return it to you that you're going to have to follow IRS guidelines.

I would also prepare a Form 1099-MISC for the return paid and HAND WRITE in the Recipient's ID Number Box "REFUSED TO SUPPLY" and send that off to the IRS with your other 1099s.

Just be advised that if you P*** the landlord off sufficiently he may well look for any reason at all to evict you from the space. You should start looking NOW for other accomodations. And be ready with an attorney in case he retaliates.

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answered 12 Jan '10, 20:47

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EAgent
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If no TIN or EIN by the time the next payment is due, your client must do back up withholding. I'll go odds that will shake the tree.

Helen, EA in PA

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answered 12 Jan '10, 01:20

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Helen EA in PA
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The question of whether the vendor is a sole-proprietor or not is immaterial. If your client pays more than $600 in a calendar year to any individual or entity, your client must report that information on a 1099-MISC.

If the client refuses to provide a tax id number, then you are obligated to institute 28% backup withholding, which must be remitted to the IRS. (You can't just keep back 28% and keep it in your bank account indefinitely.) You'd have to file a 941 by the end of the quarter; if the amount withheld exceeds a threshold -- I think it's $2,500 in a quarter -- you have to make monthly withholding deposits via EFTPS.

The lack of TIN for backup withholding is not an issue. You do not report the recipient's TIN when you make withholding deposits; you just report your own. In January, when you issue the 1099-MISC to the vendor and the IRS, you can put "REFUSED" in the space for the TIN. It will be the vendor's responsibility to straighten things out at that point. (The vendor is theoretically liable for a $50 fine for failure to provide the TIN, if that makes your client feel any better.)

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answered 12 Jan '10, 14:56

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Tom
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Sorry - I disagree, because the question isn't primarily about issuing 1099s, it's about backup withholding. "Payments that may be subject to "backup withholding" include ... rents ..." -- IRS Tax Topic 307.

And if you have backup withholding, you have to issue an 1099, regardless of what type of entity it is.

(22 Jan '10, 14:46) Tom

Also: you ARE required to issue 1099s to individuals, if the payments are made in the course of a trade or business (which is true in this case; we're talking business rent, not personal rent). And Corporations are generally exempt, but there are other (obscure) exceptions in the instructions besides those you mention.

(22 Jan '10, 14:47) Tom

I will restate what I said in a manner that is more clear. The type of entity is very relevant. You are not required to issue a 1099 to a corporation with 2 exceptions. So you do not 1009 ANY entity, just certain ones. The required backup withholding adds a different wrinkle, but you would never do that to a corporation because they would tell you they are a corporation and exempt. There are more 1099-misc not issued in any given year that should be than there are actually issued. The penalties for not issuing and very small and very seldom enforced.

(24 Jan '10, 22:04) AJ

I worked for a friend renovating some property at a specified hourly wage. I wound up having to sue the friend after a year and a half for non-payment. In court, my friend lied numerous times to the court in an attempt to not pay. I won the case, but for a lesser amount than I had sued for but am happy to get this resolved. Now 30 days from due date of payment, my friend wants me to complete a W9. I am reluctant to give this crooked person my full legal name and SS#. Do I have to complete this? Nothing was said in court about me providing this to him.

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answered 31 Jan '11, 15:28

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Fred
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Were you providing services to you friend personally, or to a business of his? If you were working for him on personal property, then he is not required to provide you with a 1099, nor are you required to provide him with a W-9

(03 Feb '11, 05:17) Jayson Wiser

Simpler solution ..... Look it up yourself http://www.FeinSearch.com No headache or calls, just look it up , but make sure You have the official legal business name, not just a dba or abbreviation... They have more than 5 million Vendor Tax ID numbers

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answered 21 Sep '11, 23:06

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VendorCompli...
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If less than $600 has been paid to the vendor and less than $600 has been purchased from the vendor, then simply stop buying from the vendor. No W-9 is needed if less than $600 is paid.

There is an obligation on the part of the payee. The instructions for the W-9 clearly say that a payee who fails to provide the information is subject to a penalty.

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answered 23 Jan '10, 05:52

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stephenweins...
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It's hard to stop "buying" from a vendor, when it is rent what is being paid. Lease obligations might not make it easy to terminate like that. And if it is rent, it's likely it's going to be more than $600.

(03 Feb '11, 05:13) Jayson Wiser
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Asked: 11 Jan '10, 18:07

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Last updated: 21 Sep '11, 23:06