Track1099.com SSN/ID Refused

Client has some knuckleheads who are refusing to complete W-9's. In track1099, there is a checkbox that says to check it if don't know recipients ID. These vendors were paid w/o witholding and work has ended. Client is fuming mad and hired a private eye service who has their addresses. If I check the box, will track1099 mail the Form 1099 as REFUSED and also mail a copy to the IRS? I understand those are the IRS requirements for manually mailing. Track1099 will do that for us? Have you actually tried this (checking the box) or do you think sending it manually is a better idea?

I'm not sure what they put in the tax ID box, but they mail the form to the IRS and to the recipient as it can't be efiled.

Your client will get a B notice for each form filed like that instructing him to begin backup withholding on the recipient and continue until the recipient submits a W-9.

But the client already paid them and did not withhold. Contract with the vendor has finished. What happens after?

I don't understand your question.

Means the client paid the vendor already and is not asking for the W-9 instead of before payment.

Also why is the TIN matching service on track1099 so slow?

Means the client paid the vendor already and is not asking for the W-9 instead of before payment.

I'm failing to understand how that affects your client's 1099 filing obligations.

They either file or they don't. If they don't, they have exposure to willful failure to file penalties.

If they file, they do so without a tax ID for the recipient. They will receive a B notice from the IRS notifying them to begin backup withholding until the recipient submits a W-9.

That means moving forward, if your client uses the services of this IC again, they should backup withhold and remit until the IC gives him a W-9.

If he never uses this IC again, then its water under the bridge.

Sorry, I made a big typo. Means the client paid the vendor already and is NOW asking for the W-9 instead of before payment.

Isnt the client then liable to remit the backup witholding to the IRS since it was not already done?

No. How are you going to withhold on a payment that has already been made?

Just tell the client to get the W-9s upfront from now on, and that if an IC refuses he has to withhold and remit 28% of the gross payment. The IC gets the remaining net 72%. If the IC doesn't like that, they can submit a W-9.

Thanks for your response. What I mean is because the payor did not withhold, are they going to be liable for the amount which should have been withheld? In otherwords, will the payor end up having to pay it?

Again, how do you withhold on payments already paid out?

You do not. But you are liable for submitting the withheld amount to the IRS. So he company has to cough it up. Do you get what I mean now?

I get what you're saying. I just think you're overthinking it.

You can't change the past. Backup withholding should start when an IC refuses to provide a tax ID or the payor receives a B notice from the IRS. In your client's situation all payments have been made. The client should make good faith efforts to obtain the W-9 in writing, and file a timely 1099-NEC based on what is known to him. Future payments to this IC should be reduced for backup withholding until a complete, signed and dated W-9 is provided. Furthermore, the client should adjust his business practices and start obtaining W-9s at the start of business relationships and not pay out until one is obtained. If an IC refuses, he should backup withhold.

But you are liable for submitting the withheld amount to the IRS.

Again, you can't withhold on a payment that has already been made. Look up the definition of "withhold".

You can tell client to let the contractor know they are reporting their name and address and informing the IRS that the contractor refused to provide the SS number. That sometimes works.

This was the reason why I finally dropped a long-term client. Every year, it was the same thing. One or more contractors that he couldn't locate, or refused. Add to that, the last weekend in January, he went snowmobiling leaving his wife and I alone to deal with this. I gave him three options, 1. Get W9 the first time, 2, have me issue the checks when I did payroll and I would do the backup withholding, 3. Give ne your damn work each month, and not eleven months at Christmas and the rest the end of January so I would know what contractors needed W9s. Some clients aren't worth the stress.