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Jean   Murray

Don't Forget the Tax ID Number on 1099-MISC Forms

By January 31, 2013

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Today (Thursday, January 31, 2012) is the last day to provide 1099-MISC forms to contract workers and other non-employee payees. Just in time, the "taxgirl" (Kelly Phillips Erb) reminds me to remind you not to send out those 1099-MISC forms without Tax ID numbers for the people you paid in 2012.

You must give a 1099-MISC to anyone (not an employee) to whom you paid more than $600 in 2012. And you must include a Tax ID number (Social Security Number, Employer ID or other acceptable tax ID number) on that form. Two bad things happen when there is no Tax ID number on a 1099-MISC:

1. For the person receiving the 1099-MISC, no Tax ID number means the person must pay what's called "backup withholding." You, as the person doing the paying, must withhold federal income taxes at the rate of 28% on payments to non-employees. You must pay that withholding to the IRS, just like employee federal income tax withholding.  So you, and the person being paid, are both in trouble with the IRS over this. And,

2. The IRS can impose a penalty on you for filing the 1099-MISC without a Tax ID number.

The best solution to this problem, as Kelly says, is to get a Tax ID number from EVERY person or business you pay, when you start making payments, even if there is almost no chance that you will pay $600 or more to this person in a year. Get the payee to complete a Form W-9 - Request for Taxpayer Identification Number and Certification.

Before you turn in 1099-MISC forms to the IRS before the end of February, make sure you get a W-9 form to verify tax ID numbers, and include those numbers on the forms you submit to the IRS. Read more about submitting 1099-MISC forms with the 1096 transmittal form.

 

Read Kelly's article on Tax ID Numbers and 1099-MISC Forms.

Clarifying the difference between a Tax ID, Employer ID, and ITIN

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