Form 1099-Misc

[TOM]

Contractor gives sub contractor 1099-Misc. Sends Form 1096 and 1099 to IRS. IRS sends contractor letter that sub contractors social security number is no good. Contractor cannot locate sub contractor and did not get his SSN in writting. What does contractor do now.

Thanks for any help,

Tom

[redux]

Contractor gives sub contractor 1099-Misc. Sends Form 1096 and 1099 to IRS. IRS sends contractor letter that sub contractors social security number is no good. Contractor cannot locate sub contractor and did not get his SSN in writting. What does contractor do now.

Thanks for any help,

Tom

Hi Tom:

Well, any one of a number of things might have occurred here. All the way from an honest mistake by the contractor when he recorded the sub's number originally to intentional fraud on the part of the sub. Probably no need to go into the fact that your client should have requested to see the SS card of the sub (no need to mention but I guess I did huh?)

As far as what to do now, you have not mentioned the availability of the sub, is (s)he still in town? Does your client know where the sub lives, jobs he might be working on? The only resolution, as I see it, is to physically locate the sub and resolve it that way. Beyond that, the client has learned an expensive lesson in that he will likely have to amend his return and claim the amount on the 1099-MISC as income.

[taxxcpa]

I've seen similar letters from the IRS, but I believe they were just trying to get the correct information and were not disallowing the deduction if the taxpayer couldn't provide the correct information. Illegal aliens often use someone else's SSN and a fictitious address.

Hi Tom:

Well, any one of a number of things might have occurred here. All the way from an honest mistake by the contractor when he recorded the sub's number originally to intentional fraud on the part of the sub. Probably no need to go into the fact that your client should have requested to see the SS card of the sub (no need to mention but I guess I did huh?)

As far as what to do now, you have not mentioned the availability of the sub, is (s)he still in town? Does your client know where the sub lives, jobs he might be working on? The only resolution, as I see it, is to physically locate the sub and resolve it that way. Beyond that, the client has learned an expensive lesson in that he will likely have to amend his return and claim the amount on the 1099-MISC as income.

[Gail in Virginia]

Sometimes the problem is as simple as a trade name on the first line with a social security number resulting in a mismatch. I try to find out whether I am dealing with a social security number or and EIN but it isn't always easy.

[OldJack]

I've seen similar letters from the IRS, but I believe they were just trying to get the correct information and were not disallowing the deduction if the taxpayer couldn't provide the correct information. Illegal aliens often use someone else's SSN and a fictitious address.

I agree with taxxcpa. Not having a social security number or even not filing a 1099-Misc does not disallow an actual business expense. We tell a little fib to our clients that "to get a deduction it is necessary to have the social security number" just to get them to comply with the rules and avoid penalties.

[Terry D EA]

I have had this happen with one of my clients who has hired illegals in the past (client didn't know SS not good). The IRS has sent the notices regarding the incorrect or invalid number but has only asked for verification and possible backup withholding from regular employees. The IRS has never disallowed any deduction for the expenses due to the bad number. BTW, an employer can register with the SS administration to verify social security numbers and names. However, according to the SS regulations, this cannot be used as a tool for hiring. You have to hire them first, then verify and attempt to correct the error. In the case of fraud, then termination is the answer.

Terry D.

[TAXBILLY]

I always have my clients get their subs to fill out the W-9. That's the best way to avoid a penalty.

taxbilly