Tax Question 1099 requirements

[greg_cav]

What is the name of your state? Massachusetts

My brother is a home improvement contractor and one of his clients is demanding his SSN for work that was performed in his home. He's been doing this for years, and no homeowner has ever asked for his SSN for a 1099 before.

The client wants to deduct the expense for this improvement work as a part of his business. I know this person socially a little bit. I know he is self employed, but he has a primary office elsewhere off the premises in another city.

With this background, I have two questions:

1. What are my brother's obligations for providing his SSN to this client for this kind of work?

2. Can the kind of work that he's doing (replacing windows, renovating a bathroom) in someone's primary residence be claimed as a business deduction? If it is a legit deduction, is an invoice for this work sufficient for tax deduction purposes.

He's obviously leery of giving any personal information to anyone, and I'm concerned of him helping someone evade taxes when it can come back on him and trigger an audit or conspiracy charge. If this is a bogus deduction, we would like to know up front so that we can confront him with it.

Thanks,

Greg

 

[johnathandoe]

1099

CALIFORNIA

Ive been told I need to issue a 1099 to an individual for services I paid him for. I was surprised at first, when I learned I had to do this, b/c this is just a little hobby Ive got going. If I were the guy, I wouldnt want to give my SSN out either. But according to IRS law, I paid this guy over $600 and therefore he MUST give me a TIN/SSN so I can file the 1099. I was told I should have required him to complete a W9 form before I paid him--I didnt know about it at the time, otherwise I would have.

I actually called the IRS and asked what to do if the guy doesnt give me his TIN/SSN. He said that the IRS can obtain the info. Your brother MUST give his SSN out sooner or later. The income that your brother is earning is TAXABLE and must be reported.

 

[greg_cav]

Thanks for the reply. I still need to know if this guy is trying to claim a bogus deduction, because it gets directly to the risk of audit. Why should my brother make it easier for the homeowner to claim an illegal deduction if its going to raise his risk of audit?

Your brother MUST give his SSN out sooner or later. The income that your brother is earning is TAXABLE and must be reported.

We also still need to know if the invoice is sufficient backup for him to claim the deduction. No one's trying to avoid taxes here, but we are trying to do the right thing & also trying to avoid an audit on either part. No one I've ever hired to work on my house has given me their tax ID info before. I've just kept the invoice as proof of the transaction. The money paid was not wages per se (in that they didn't agree to an hourly rate and the client paid for that) - it was a fee for service.

 

[Snipes5]

Give him the SSN if it's required. If you don't, that WILL trigger IRS interest. If your brother does give out the SSN, this will not trigger an audit for him.

If HE commits some kind of tax fraud, that won't trigger an audit for your brother either. I wouldn't waste my time as a private citizen trying to figure out if another private citizen is planning to defraud the government. In this particular instance, it being one person, it isn't worth the effort, unless your brother is somehow legally obligated to report something like that. A private citizen is not.

For all your brother knows, the guy could believe his deductions are completely legal, and maybe they are. It really isn't your problem, but if your brother doesn't give the SSN when he is supposed to, then he WILL have a problem with the IRS.

Snipes

 

[johnathandoe]

Thanks for the reply. I still need to know if this guy is trying to claim a bogus deduction, because it gets directly to the risk of audit. Why should my brother make it easier for the homeowner to claim an illegal deduction if its going to raise his risk of audit?

We also still need to know if the invoice is sufficient backup for him to claim the deduction. No one's trying to avoid taxes here, but we are trying to do the right thing & also trying to avoid an audit on either part. No one I've ever hired to work on my house has given me their tax ID info before. I've just kept the invoice as proof of the transaction. The money paid was not wages per se (in that they didn't agree to an hourly rate and the client paid for that) - it was a fee for service.

Like Snipes5 said, it doesnt really matter if he's claiming a bogus deduction or not. You dont know, and it's up to the IRS to do any auditing. But if you really want a qualified answer, contact the IRS at their hotline number. I called them yesterday and talked to a human being. It's still early in the tax season and you dont have to wait long. 1-800-829-4933

Even if they are not "wages" your bro received, the IRS requires all payments of $600 and over be reported by the payer, as long as those payments are made in the course of normal business activities of the payer--so, yeah, it is kind of questionable that this guy would want to deduct his home improvement expenses.

Call the IRS and ask them what to do.

I emailed a contractor last night to get his SSN and was worried he would raise a stink. Fortunately, he emailed his number back right away. Good luck!

 

[abezon]

If he doesn't want to give out his own SSN, he can file to get a business EIN. It can be done by fax & take very little time. www.irs.gov has the forms & instructions.