I started a painting business last year and hired subcontractors for all the labor. There were about 20 of them, and I paid out around $130k. I have W-9s for some of them, covering about $65k, but I can’t get the info from the rest to report the remaining $65k.
I didn’t realize how important it was to get W-9s upfront. Now I’m stressing about what happens at tax time. If I can’t report the $65k, how bad is it going to be? Any advice would really help.
You’re only in trouble if you get audited, but the fine can be up to $330 per missing 1099. Next time, make sure to collect a W-9 before paying anyone. If they want to get paid, they’ll hand it over.
Brady said:
You’re only in trouble if you get audited, but the fine can be up to $330 per missing 1099. Next time, make sure to collect a W-9 before paying anyone. If they want to get paid, they’ll hand it over.
That’s not as bad as I thought. It would still cost me about $4,000, though.
@Morgan
That’s just part of it. If any of them were supposed to have backup withholding and you didn’t collect W-9s, the IRS might hold you responsible for their taxes. That’s why you don’t pay anyone without getting a W-9 first.
Just something else to keep in mind. If you have workers’ comp insurance, make sure you collect certificates of insurance from your subcontractors showing they have coverage. If they don’t, you could end up paying the premium for the work you paid them to do.
Reach out to the subcontractors and let them know they need to provide their info so you don’t have to file incomplete 1099s, which could trigger attention from the IRS.
Presley said:
Reach out to the subcontractors and let them know they need to provide their info so you don’t have to file incomplete 1099s, which could trigger attention from the IRS.
Definitely make the request in writing, but also follow up by phone or in person if needed.
Do you know if any of them are LLCs? In some states, EINs are listed on the Secretary of State’s website.
Leith said:
Do you know if any of them are LLCs? In some states, EINs are listed on the Secretary of State’s website.
I do have most of their LLC names and addresses.
Leith said:
Do you know if any of them are LLCs? In some states, EINs are listed on the Secretary of State’s website.
I do have most of their LLC names and addresses.
What state are you in?
Morgan said:
@Leith
Colorado.
Check the Colorado Secretary of State’s business entity search. They should have a feature for this.
Even if you don’t have their TINs, you should still file the 1099s. The IRS has guidance for situations like this.
This article explains it well: What Happens If a Contractor Refuses to Fill out a W-9?
If you file on paper, write the word ‘refused’ in the TIN box where the SSN or EIN would normally go. It’s also good to keep a written record of your request for the info.