When you hire contractors or freelancers, you may need to file Form 1099-NEC to report the payments made to them. This form is used to report non-employee compensation, which includes money you pay to independent workers for their services. One important part of filing this form is providing the Taxpayer Identification Number (TIN) of each contractor. But what if you don’t have the TIN for a contractor? Don’t worry. Here’s what you can do.
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A TIN is a unique number that the IRS uses to identify taxpayers. It could be a Social Security Number (SSN) or an Employer Identification Number (EIN). Most contractors provide their TIN to you when you hire them. However, sometimes contractors may not give you this information, or they may not have one. So, what happens if you need to file Form 1099-NEC but don’t have the TIN?
Step 1: Ask the Contractor for Their TIN
The first thing you should do is reach out to the contractor and ask for their TIN. Most of the time, contractors are required to provide this information when they begin working for you. The easiest way to collect this information is by asking the contractor to fill out a Form W-9. This form is simple and helps you collect the correct name, address, and TIN for the contractor.
If the contractor is unwilling to provide their TIN, you can still file your Form 1099-NEC, but there are a few steps to follow.
Step 2: Backup Withholding Requirement
If you cannot get the contractor’s TIN, you may be required to withhold a portion of their payment. This is called backup withholding. The IRS requires you to withhold 24% of the contractor’s payment and send it directly to the IRS. This ensures that the IRS receives some tax payment, even if the contractor hasn’t provided a valid TIN.
To avoid backup withholding, it’s important to try and get the TIN as soon as possible. Always remind the contractor of the need for this number when starting a new contract.
Step 3: File the Form Without a TIN
If you don’t have the TIN and the contractor refuses to give it to you, you can still file Form 1099-NEC. In this case, you should enter “TIN Applied For” in the TIN field. However, you must make sure that you have made a reasonable effort to collect the TIN from the contractor. The IRS expects businesses to actively try to collect this number, and entering “TIN Applied For” should only be used if all other efforts have failed.
Step 4: Contact the IRS
If you have made several attempts to obtain the contractor’s TIN and still can’t get it, you may want to contact the IRS for guidance. They can offer advice on how to handle the situation. In some cases, the IRS might suggest that you file the form with the “TIN Applied For” message or that you take other actions to ensure compliance.
Step 5: Report on Time
Even if you don’t have the contractor’s TIN, you must still file Form 1099-NEC on time. The deadline for submitting this form is January 31 of the year following the payment. Failing to file the form on time can lead to penalties, so it’s important to stay on track with deadlines.
What Happens If You Don’t Get the TIN and Don’t File?
If you do not make a good faith effort to collect the TIN, and you fail to file the form correctly, the IRS may impose penalties. The penalties can increase based on how late the form is filed and whether or not you made efforts to comply. Therefore, it’s important to follow the steps mentioned above to avoid fines.
Key Takeaways
Here are a few simple things to keep in mind when filing Form 1099-NEC without a TIN:
- Always ask your contractor for their TIN as soon as possible.
- If you don’t have a TIN, you may need to withhold 24% of the payment as backup withholding.
- File the form on time, even without the TIN, to avoid penalties.
- If you can’t get the TIN, use “TIN Applied For” but only if you have made reasonable attempts to get it.
- Contact the IRS for help if you’re unsure about what to do next.
Filing Form 1099-NEC without a TIN may seem like a tricky situation, but with the right steps, you can handle it smoothly. The key is communication. Always work with your contractors to collect the necessary details, and if there’s a problem, take the right actions to stay compliant with IRS rules.
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