WHAT IF A PAYEE REFIUSES TO COOPERATE WITH THE PREPERATION OF 1099s

As part of the 1099 process, payees are required to provide their Tax Identification Number which is either their Social Security Number or Corporate ID Number. But what happens if a payee refuses? What do we do then?

Per the IRS, the 1099 still needs to be prepared and sent to the IRS, but with the tax identification Number blank. Then send the payee the following:
(1) A copy of the 1099 that is being sent to the IRS
(2) Form W-9, which is the form that the payee reports their Tax Identification Number to you
(3) A letter, on company letterhead, informing them that (a) The enclosed 1099 is being provided to the IRS,(b) Requesting them to return the enclosed completed orm W-9, (c) The IRS will assess a penalty against them for refusing to provide their tax identification number and (d) 28% will be withheld from all future payments
(4) A return envelope

You need to keep copies of all of this in a file to show the IRS that you did your best effort to get the payee’s Tax Identification number.

The IRS will then assess you a $50 penalty. The penalty can be waived if copies of the above are provided

If you need help in preparing 1099s, please give us a call today at 562-912-4334.

Please note, to comply with IRS regulations, we need to advise that any discussion of federal tax issues in this blog is not intended or written to be used, and cannot be used by you, (i) to avoid any penalties imposed under the Internal Revenue Code or (ii) to promote, market or recommend to another party any transaction or matter addressed herein. For more information please go to http://www.lw.com/docs/irs.pdf