2013 W-9 and 1099 rules

Re: 2013 W-9 Forms And 1099MISC Rules (Penalties included at the 2nd half of the page)

Compliments of Steve Bartha


  •   The IRS W-9 form is used to let another person or company know your name, soc sec number or federal ID number, address and your filing status as a business. The worker, or service provider, fills out the form. The receiver of the completed W-9 paid the worker (or service provider) $600.00 or more during the year. Thus, a person or business that has to report expenses of $600.00 or more must have an accurate and timely received W-9 form from whomever was paid the money.
  • Form 1099MISC is used to report payments of $600.00 or more to a non-corporate business, or person, for services rendered as well as to your landlord for rents paid as well as your medical care provider. Services can include lawn work, repairs, attorneys fees, accounting fees, bookkeeping fees, elder care, and barters for services.
  •  The rule now is that the payor of monies must have a W-9 in hand before the first payment is given. If the W-9 in not correctly filled out, or is not given back to the payor, the payor is obligated to withhold 28% of the pay and must continue to do so until a proper, correct  W-9 is received.
  •  If an employer fails to receive a W-9 and pays the worker, filing a 1099MISC at year end and has incorrect data on the 1099MISC, the employer can get stuck with the 28% tax that was not withheld. Plus, there is interest and penalty that goes along with the taxes due.
  • There is now a $300.00 fine for not filing a 1099MISC and smaller fines if any errors are found on the form.
  • The 28% withheld funds are to go to the IRS. They are sent in the name of the worker and the worker gets credit for the payments against their tax debt at year end. I will not go into the details for that part right now but you can contact me for instructions if you need them later.
  • One of the main problems I have found with the W-9 form is that they are often not filled out correctly. Bill is not Bill but William. Ron is often Ronald. Steve is Stephen or Steven or Stephan. Chris could be so many other variations, male and female. Middle initials are left out. Type of business is left blank or wrong.
  • The rule now is that the data on the W-9, that goes on to the 1099MISC form, must match what the IRS and the Social Security Administration have on file. This can be a mess if a woman is divorced and her soc card does not match the name she is now using. The 1099MISC form can be challenging in itself with the various categories for what the payments were for.
  •  When a soc sec number is used on a 1099, you must properly enter the hyphens, ex., 123-45-6789 but a federal ID number would be 12-3456789. They both have nine numbers. A person uses a soc number while a business, using a business name for its payments received, uses a fed ID number. If a fed ID number is used, the name of the business must be registered and used on the tax return.
  •  I have seen many IRS notices that state that there are errors on the past year's 1099s. Some are the name issues stated in # 7 above. Some are improper hyphens in ID numbers, see # 9 above.
  •  The IRS has been sending out warning letters for the past three years stating that 1099 forms were received with errors. They state the the errors must be corrected for the next year's filing. Often the errors are theirs due to keypunch mistakes. When I have written them stating this fact, they send back very nasty letters which say that I am out of line to correct their data and that their notices clearly state that no response is necessary. But, I am getting the same IRS letters for the same clients for three years on 1099s I prepared and I confirmed all the data is correct. No fines yet but there will be if they cannot match data correctly. Wow.
  •  I expect in the next few years that the IRS will require the FIRE system to go into effect. That is an electronic, computer-required link up where you can enter data from a W-9 and they will review it, letting you know if it matches what they have. That way they can fine us royally for not having accurate data if we failed to use their system before 1099s are issued. This supposed to be used before the first paycheck is issued.
  • Sometimes we do not have accurate data to go onto 1099 forms. That is when I prepare two sets of 1099s with two separate 1096 transmittal forms. The 1099s I know are correct are sent out and I continue to attempt to get good information on the remaining ones. Hopefully they can all be filed on time because there are also late filing penalties.
  •  There are states, such as Michigan, that require they receive copies of 1099MISC forms by 2/28 of the next year. Ex., 2012 1099MISC forms, pages two, go to the State with form SUW 165 by 2/28/13. The worker gets theirs by 1/31/13. Know your state laws.
  •  Sometimes workers refuse to cooperate with giving out W-9 information. The IRS clearly states that such action should be followed up with a "B" letter. The IRS website or I can help with that. I only give workers ten days to cooperate or ask for their info before their first check is to be issued. When a W-9 is not forthcoming, I also include a letter stating firmly that I will turn them into the IRS for refusing to cooperate with federal laws.
  • One can find many reasons why a W-9 is not sent back or is prepared incorrectly. The worker can be on disability and does not want to lose the benefits. A worker can be on unemployment and fears loss of benefits. Child support dodgers, tax cheats, and so on.
  • The IRS has worked hard at making this area an income producing one with their fines. Their intent is to close the gap in the number of tax cheats who are paid "under the table". The weight of all of this is on the employer and not the worker. A worker can give bad data, such as from illegal aliens, with the employer getting the fine. That is why the FIRE system is coming on board plus the 28 % withholding requirement.





Now that we defeated the section of the Obama Health Care Bill that required everyone to file a 1099 on everyone else, personal and business, for goods and services, there is a another law that was slipped elsewhere into the Bill that was not removed.

This has to do with the penalties for not sending a 1099 form when it is required. The penalty starting next year, 2012, is up to $150.00 per 1099 form for not sending it to the IRS "in a timely manner" and another $150.00 per 1099 for not sending it to the person who is supposed to receive one "in a timely manner". Thus, if you do not send one in at all, it carries a $300.00 fine (per 1099).

All 1099s must be sent to the recipients by Jan 31 of the year after the money was paid out. Jan 31, 2012 for 2011 tax year.

All 1099s must be filed with the IRS by Feb 28 of the year after the money was paid out. Feb 28, 2012 for 2011 tax year.

All 1099s must have a 1096 transmittal form accompany it to the IRS.

Many states require a copy of the 1099s and sometimes, the 1096.

There are 1099s numbered A, B, C, DIV, G, H, INT, MISC (for labor), OIC and 1098 (mortgage interest, especially if you have a land contract) and there are others.

Who should file a 1099 INT? That form is filed by the person or business who pays interest on a loan. Think about that one. The bank sends you one because they pay you interest. If you lend a relative money and that person pays you interest, then they have to send you a 1099 INT if they paid $10.00 of more in interest during the year.

Who should file form 1099 MISC? Everyone who pays money to a person or a non-corporate business for services rendered.

The cut off is simple. Once you pay $600.00 or more in a year, you have to file a 1099 MISC. Bartered labor is included in this one.

Who should you send a 1099 MISC to? Lawyer, accountant, surveyor, lawn maintenance, snow removal, dentist, doctor, laborer, landscaper, builder, plumber, car mechanic, landlord, chiropractor, anyone who is not incorporated and who provided a service to you or your family or your business.

Not your butcher, plant supplier, office supply provider, or grocer because they are selling you goods. Only services are included in this law.

The law we defeated would have included all that I have excluded in this letter.

NOW, there is another glitch. You cannot get 1099s and 1096 forms off the internet or from the post office. They can only be found at a few places. One is at the IRS website and they will MAIL them you. You can get them at the office supply store for a hefty fee. You can ask a professional such as myself and see if we have any extra.

I will be ordering thousands of extra forms this year because of the enormity of this law.

The Health Care Bill needed a way to pay for itself and this is one of the ways the federal government plans to bring in an awful lot of money.

It is a fact that the IRS does not make these forms easily accessable. We already find this with other business forms and tax forms where the IRS says order them from them off the internet or ask a professional accountant to supply forms.

What we see coming is the requirement to electronically file the 1099s. I predict we are only a couple of years away from that experiment. With the Everify system for employers to use for W2 employees, this will be the next step. They want a paperless sytem which I find difficult to manage when I do IRS audits and they DEMAND copies of all tax related documents.

No easy answers for us. Lots of demands and barriers and fines from them.


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Comment by Patriot Eagle on February 2, 2013 at 11:33am

Not only are these rules nasty, I just got a notice that this Fall they will start sending out penalties if any 1099s they receive have errors on them.  Thus the game has begun.

Comment by Susan Nielsen on January 22, 2013 at 11:55am

I did forget to mention that if you do have Tax questions- we are very lucky to have Steve here to answer them for you. He has helped many members...

Comment by Susan Nielsen on January 22, 2013 at 11:53am

The thing is... have you ever messed with the IRS? I have, I would not recommend it to anyone! There was a corp formed with 500 of us filing against them- with the best Tax attorneys in Newport Beach and we could not win!  They disallowed a write off and then they went 5 years retroactive- after first approving it! Folks were getting 10 notices for hundreds of thousands of dollars...My Hubby and I personally filed against them and we won on our own but not as part of the corp... we paid 5 cents on the dollar... not too bad considering the man with our plan committed suicide...What a terrible few years...I would not recommend going head on with the IRS...

Comment by Mike Anstrom on January 22, 2013 at 11:37am

Can you say, Sales Tax?  No IRS, No Tax Codes, No Withholding, No filing, No refunds to wait for.    Pay only on what you buy with food and drugs exempt.

Comment by Philomena Haas on January 22, 2013 at 11:37am

I like the attitude of Mike Anstrom who said that "I will never file this crap so they can get their grubby little commie fingers on my or my hired person's hard earned money."  That's the American spirit.  I agree, lock and load and keep your ammo dry.

Comment by Susan Robertson on January 22, 2013 at 11:32am

we need a much simpler tax system here!!!

Comment by Mike Anstrom on January 22, 2013 at 11:26am

They can kiss my lily white butt!  I will never file this crap so they can get their grubby little commie fingers on my or my hired person's hard earned money!!  It is MINE and it is HIS but it is NOT THEIRS!!!  Lock and load, patriots!

Comment by Rich Knoch on January 22, 2013 at 11:24am

obamacare . . . buckle up for a rough ride till this Regime is excised!

It's possible some of this has been repealed, but . . . . . . beware this unscrupulous Regime and its Operatives!  

If you live in a Democrat controlled state reality rarely affects the way laws or bureaucratic regulations are enforced!

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