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Customers sending 1099-NEC

mjk

Titanium
Joined
Oct 20, 2005
Location
Wilmington DE USA
My shop is an S corp with valid tax ID since 2001
We have manufacturing and wholesale licenses in the state of Delaware
Occasionally we have customers request a W-9 which is not a big deal
Had a customer in Nov 2023 request an "updated" W-9 to meet IRS regulations
I responded that we had sent them one in October 2022 and that nothing had changed.
The IRS is still using the same revision ogf the W-9 from, my info has not changed.
My response was that there was no need for an "updated" W-9 and if needed I would send a copy of what I sent in 2022(if requested)
There was never a request
Monday 2/5/23 I receive a 1099-NEC for 2023 from this company.
We have never received a 1099
I called my accountant who really only does our year end filing about this and whether this was new but he had never heard of this.
My concern is that although this customers sales/payments will be part of our 2023 tax calculations they are not addressed as from this particular customer, but as totals from all our customers.
Comments on whether this will create a "flag" for an IRS audit
 
Since I became an LLC I have routinely ignored 1099s
It all gets put on the taxes, it is all paid by check anyway so couldn't hide it if I wanted to.
[knock on wood] haven't been audited ever. 30+ years, 20 years in this structure
 
I always assume that it does create some sort of flag so I do report every 1099 I receive. It's not too much of a hassle and changes nothing.
 
What tax ID number is shown on the 1099-NEC for you, the payee? Presumably it is your S-Corp's EIN, right? Then ignore it, lump it in with your gross sales as you likely would anyway...

Edit to add: Since you are a corporation, the 1099 is superfluous, and the IRS should know that... (but so should the customer who sent you the 1099....)
 
PS, I would have just sent the same W-9 you had sent a year ago when they first requested the update, less hassle than trying to tell them that they should already have the information...
 
"Since you are a corporation, the 1099 is superfluous, and the IRS should know that... (but so should the customer who sent you the 1099....)"
agreed
The stubborn part of me doesn't deal well with people that are in a job and that should know better asking for an "updated" form when it in fact the form they had on file was current. I'm guessing if they had worded it, "We are requesting a current copy, regardless of previous history", I would have just sent them one
Although not an accountant, I've been around long enough to understand what tax forms are needed and when and how to process. Not dealing with cash having all payments made thru checks or ach, I just don't want a flag raised, evan if it could be explained.
 
Do you guys collect w9's and send 1099's? My accountant has been on me about doing this but I feel like a dick sending 1099's to vendors.

I am curious about the general consensus on this.
 
Nope, but I don't purchase any material/goods over $100 cash , and no labor either
Don't send any 1099's or collect W9's
Are you incorporated as an S or C corp?
 
I had a customer refuse to pay (open account) unless I sent them a W9. Told them to send the tool back. Also told them their accountant wants them to collect them to make them think he is giving them important advice. They paid with a credit card. Somehow that made it OK.
 
When you are paying a corporation, you do not need to send a 1099, so you don't necessarily need a W-9 *IF* you know that the entity you are paying is a corporation to whom you know you will not need to send a 1099 (easy way to tell, you write your checks to: "Business Name, Inc." <--- it's right there).

If you pay an un-incorporated entity (e.g. individual contractors) more than $600 in the year you are supposed to send them (and the IRS) a 1099, and you need the information from the W-9 in order to do that (namely, their tax ID number, but also their identifying their legal name and what type of entity they actually are, and providing their official mailing address).

There is nothing magical about the IRS's W-9, you can create your own version, so long as you are collecting the "required" information. The W-9 is for your own records anyway, you don't file them with the IRS, you just need them so that you can complete the 1099's as necessary.

In a past business, we paid several individual contractors every year, and sent them 1099's as required. If we were writing our check to "Business Name" rather than to an individual, we generally did not bother...
 
My shop is an S corp with valid tax ID since 2001
We have manufacturing and wholesale licenses in the state of Delaware
Occasionally we have customers request a W-9 which is not a big deal
Had a customer in Nov 2023 request an "updated" W-9 to meet IRS regulations
I responded that we had sent them one in October 2022 and that nothing had changed.
The IRS is still using the same revision ogf the W-9 from, my info has not changed.
My response was that there was no need for an "updated" W-9 and if needed I would send a copy of what I sent in 2022(if requested)
There was never a request
Monday 2/5/23 I receive a 1099-NEC for 2023 from this company.
We have never received a 1099
I called my accountant who really only does our year end filing about this and whether this was new but he had never heard of this.
My concern is that although this customers sales/payments will be part of our 2023 tax calculations they are not addressed as from this particular customer, but as totals from all our customers.
Comments on whether this will create a "flag" for an IRS audit
I received my first 1099 in 40 years of business from one customer last year.
I'm WTF, this customer deals with multiple businesses why are they sending me a 1099?.
and They have my Corp C on file.
 
I get dozens of 1099's every year. They are meaningless, so long as you report more gross income than the total of the 1099's you get. The IRS will have no basis to think you are under reporting income if you report more income than the 1099's show.

Unlike W-2 forms, you don't even attach 1099's to your tax form. It is stupid to send a 1099 to a business. 1099 reporting is to keep a person from taking a check to the payer's bank and cashing it there so it does not pass through their bank account. You can't take a check made out to a business name and cash it. It has to pass through the business's bank account. Therefore, IRS can always track a corporation/LLC/partnership's gross income (except for businesses that deal in cash.)
 
Ya, S corp here, get 1099s every year. Not a big deal they really dont mean anything in my case, only that this customer put us in their system incorrectly, or dont understand how this works.
 
My LLC of 19 years gets all kinds of 1099. One from each credit card processing company, one from Amazon, a handful from various customers who just like sending them. It doesn't matter at all. Takes less than a minute to scan them and send them to the accountant. If you aren't cheating on your taxes, you don't have any additional tax obligation because somebody decided to send you a 1099.
 
I thought 1099 were for things other than physical products. Untraceable, like rents, personal or business services, non employee labor, interest, etc.
 
1099's are for reporting to the IRS that someone (not a corp) has been paid for goods or services above $600/year
A W-9 is sent to a company paying to justify not creating a 1099 for what they have paid, otherwise they may be subject to withholding requirements.
Look what has happened with Ebay/Paypal in the last few years sending out 1099's because they are recording the +$600/year to non-corp's
 
If a company requests a W9 from me, it is guaranteed that I will get a 1099 from them. As an LLC, with an EIN, which I guess no one considers a company/corporation/business anymore.

I recently had a vendor? company tell me they wouldn't accept a check, or a credit card, but that they would only accept cash. The confusion never ends...
 
Nope, but I don't purchase any material/goods over $100 cash , and no labor either
Don't send any 1099's or collect W9's
Are you incorporated as an S or C corp?
Yes, I am an S Corp. By cash, do you literally mean cash? Or you don't write checks over $100? As I understand it; whether the paper trail exists doesn’t matter. If the IRS decides to hammer someone for not submitting 1099's, they can do it. It's one of those 'just because they haven't doesn't mean they won't' sort of things.

The new influx of spending to build up the IRS means that eventually, they will become efficient enough to institute penalties that have otherwise been ignored.

According to my accountant; I need to collect a W9 from every vendor because they are held liable for filling out the form correctly and that is my proof for who has claimed a corporation status and who hasn't.
 
Cash as in a non invoiced payment, but yes in the true sense green money.
I frequently buy on CL or at the local flea market from who ever is selling,
Piles of used tooling, etc...stuff that I'm getting for pennies on the dollar purchases typically $10-20.
The most I've paid is $100. One of the requirements of a small business is finding ways to save money. These are not vendors in the true sense and I don't give them a 1099, and I'm not required to

I have about 1200 frequent active and inactive customers I deal with/have dealt with over the last 30+ years
I've received a request for a W-9 from maybe 20 in that time.
Possibly because my company name has "Company, Inc." on letterhead, quotes and invoices
Is it a guarantee I'm a corporation, no, but I believe that possibly eliminates a majority of requests for a W-9
Regarding requesting a W-9 from every vendor I deal with, possibly your accountant is overly cautious or has another reason.
Do you request one from the power co, internet provider, McMasterrr. MSC ......etc:?
As explained to me over the years in both thru my manufacturing business accountant and in private weekend warrior work, a 1099 is given usually to a "person" to allow the payer the ability to not have to withhold tax liability's AND pay the required company matches. Sidelining workers comp insurance, unemployment are all topics that are related and would be excuses for paying someone then having to generate a 1099. The fact that it flags the IRS for a person receiving the 1099 is for that person to deal with.
I was a weekend warrior drummer in the early 2000's.
Playing on weekends for fun, most years I might have made a total of $300/yr, not reportable income, and if I were to weigh out expenditures, surely a financial loss.
One year the bass player I worked with pulled together a lot of nice work. January 30th following year I get a 1099 in the mail for $4000+
I had to to list it on my tax return.
Following year I decided I wasn't going to "work" like that anymore, and after you've seen one wedding reception catastrophe as an outsider you don't need to see another
 








 
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