Refuse to provide TIN. Consequences: burden of the withholding, penalties and letter to IRS.
Some of the independent contractors may decline info query, so any vendor that came across such situation learned ‘no W 9 no money’ trick.
It might be a trap sometimes, since you never know how much it is to pay for hired person throughout annually beforehand, especially when it comes for promiscuous job like electrician or plumber services and you don’t want to give the form beforehand, over a small work for $200.
There is no kept mystery that will not come to light January day when 1099-MISC is being filled out and there’s nothing more confusing than paperwork troubleshooting.
Who is left with 28% withholding burden
Since vendor’s prime responsibility is to get TIN plus full name, burden is getting laid on freelancer shoulders immediately. Dealing with emailable 1099, payer may state that contractor declined to submit TIN, and attach letter that describes the situation.
If a contractor doesn’t have TIN yet but already submitted application, there are 60 days left to get it done and provide further, otherwise backup withholding will apply until processed (doesn’t work with non employee compensation).
There are various rules stated in Instructions for Information Returns that help to find out in when person should get ready for some fee pay.
Vendors should take extreme care of these points:
- Fillable data return failures without reasonable explanation cases (unless the contractor qualifies for an exemption) should be under strict time attention. Take into account amount of days until you being provided with complete set of data.
- Failure to file Miscellaneous document based on a refusal or failure to provide TIN does not excuse business from timely filing all required info returns.
To avoid 1099 failing to include a TIN penalty the business needs to get ready solicitations to the contractor. In need for additional help left — make sure to ask Taxpayer Advocate or call IRS help center.