Missing Contractor SS#

A client called recently with the dilemma of a contractor who did excellent work refusing to provide a social security number. The contractor had just finished dealing with the after effects of identity theft and did not want to risk it again.

It was understandable someone who has dealt with identity theft did not want to risk suffering through the fear, expense, and inconvenience again. However; the Internal Revenue Code requires the contractor provide his or her Tax Identification Number (TIN) to those who have paid for his services..

The client did not want to stop using the contractor, many business owners do not want to end business relationships because of the contractor has refused to provide a TIN. Yet she as the employer of the contractor is responsible for reporting payments made to him.

The solution provided by the IRS when the contractor refuses to provide a social security or taxpayer identification number (TIN) is for the payer to immediately start backup withholding at 28%. This makes it imperative to request the TIN when the relationship starts and to start the withholding when the contractor fails to provide it.

It is best to give the contractor the W-9 before employing the contractor making employment conditional on its return. If it is returned incomplete or is missing the identifying number (social security/TIN) keep that copy for your records. Before December 31st send a second Form W-9 by registered mail requiring a return receipt.  And most importantly begin backup withholding and continue backup withholding until you receive the TIN.

If the registered letter is returned with an incomplete W-9 file or unopened file with the contractor’s records that you do have and the green postal receipt as proof you requested the information and did not intentionally ignore the requirement to file complete reports.

For each year the person works for you make a request for the information using Form W-9 and keep track of the responses. For those that do not provide a TIN withhold 28% of the payment and submit the payment to the IRS by the end of the quarter by check or EFTPS. Next time I will cover how to report this to the IRS.

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