Rental repair invoice without tax id - is valid for tax return?

Question

I have a rental property improvement invoice with no tax id. The handyman refuses to provide his SSN. The worth of repair $5.5K. Is the receipt valid for next year's tax return in California?

Eamonn McElroy · Answer

@Debasish Bhattacharjee

Technically if he is refusing to provide you with an executed W-9 you should withhold and remit income taxes on his payment at the prescribed rate, and then issue a 1099-MISC to him at the end of the year with "REFUSED" in the recipient TIN box.

Always get a W-9 as part of a complete and executed contract before any work begins.  That's a best practice.

"again since he doesn't own a business he didn't have tax ID"

If he doesn't have a business or EIN then he is a sole proprietor and should provide you with his SSN via an executed W-9.

Get a tax pro on your side who knows what they're doing, withhold and remit on his payment, and pay him the difference when the work is done.  If he takes you to court over that it's going to be a very short trial and he's going to be sorely disappointed.  Document that you made multiple bonafide efforts to obtain an executed W-9.

Natalie Kolodij · Answer

Lots of contractors and handymen are like this- he's not going to report that income on his taxes.

You can still claim the expense on yours.

Here's the issue- it's going to ask you if you were required to issue any 1099s, and if so, did you. You're required to prove you requested this information from the contractor and they refused

You were required since this wasn't a corp and was over $600, but you can't issue it.

I would talk with your tax pro and see what they want to do to handle it.

Debasish Bhattacharjee · Answer

Thanks for all of your response. Today I have sent a check with the due amount and mailed him. I am definitely going to claim this money for my tax return and will see whichever best way I can deal this.

Can I report this to contractor state liscense board? First of all I knew that he is not a liscense contractor, and I have searched for his name in the board and couldn't find it. I also read an article saying it is illegal for a non liscensed contractor to get money over $500. This info I came to know when I have been notified by the handyman that he will be taking this matter to the court. If anyway I can report about him not providing w9 or 1099 or anything, atleast this should not harm other people like me.

I totally agree at the time of selecting the handyman, I have asked verbally if he can provide receipt with tax ID/ssn and he said yes, but after work he is not, and there is nothing in writing which confirm he agreed upon to provide the same/tax ID.

Its my fault. Lesson learned. At the same time I am thinking if some way this can be reported and to whom as non liscensed contractor.

Thanks for all different input which made me more confident about what are the next steps I need to do and I chose not the bravest way to fight instead listen to what he said.

Debasish

Bill Kramer · Answer

@Eamonn McElroy

That's a very real story. It was either hunt down that SSN or take a $6k hit in taxes.

Also, dont be afraid to report that contractor to the IRS whistleblower hotline. They will get him eventually.

Eamonn McElroy · Answer

@Bill Kramer

One would hope that didn't happen...

Ethical considerations aside, it's a crime for a tax return preparer to disclose client information unless specifically authorized by the client or pursuant to a court order.

Treas. Reg. § 301.7216-1

Bill Kramer · Answer

@Debasish Bhattacharjee I had a sub do this to me. Use honey, not vinegar.

I strung him along, continuing to pay small amounts (I still needed the work done anyways) and waited a week or so and casually brought up taxes and complained about my tax guy and asked him for a reference.

He actually told me the large company he used. So I went there, had them do a mockup of my taxes and mentioned the sub sent me as a referral. Turns out, the chick knew him! So she looked up his tax returns and gave me his SSN for a "small fee"

I filed, sent him a 1099 and fired him. A little underhanded yes, but it worked.

Debasish Bhattacharjee · Answer

Thanks for the update Eamonn. Today I have asked the small court to verify if a unlicensed handyman can file such complain to make sure if it's a threat or really he will file in the small court, the court says yes they can and it will be under "unjust enrichment". Also it seems for small court I can't hire any attorney. So at this moment I have no idea just by informing judge, saying handyman isnot issueing W9, I am not paying him the remaining 40%of the balance would be a valid reason I guess.

i know it's kind of side tracked and question is more towards small court case.

Any one has any input on this. Again I will not take anyone's idea as advice instead it will help me preparing myself.

Infact I tried to take help from attorneys and since no attorney can represent in small court case in California, no one is interested to provide any input.

Debasish Bhattacharjee · Answer

Hey Bryan, thanks for the update. I have asked the handyman to provide me IRS -W9 form, again since he doesn't own a business he didn't have tax ID, on top of it he claims that this invoice is sufficient to file tax return, but he can't provide SSN to me.

Since I have been negotiating with him to provide me a receipt with so and so info, he seems like saying me, to go to a small court for the money I owe to him.

More over I have paid 60% of the money with check and the remaining putting on hold unless he provide me the receipt. Am I obligated not to do this or pay in full and then chase him to provide his SSN for tax purpose?

Its kind of weird, that he is taking this matter to settle in small court.

Any suggestion would be appreciable though I would not treat those as advise, anything I will do will be my sole decision.

Aaron K. · Answer

For you yes but the trouble arises with the handyman's reporting

Bryan Devitt · Answer

You need to get the W9 before you pay them. As far as I know you're SOL but maybe there is a way my accountant doesn't know about

Rental repair invoice without tax id - is valid for tax return?

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