Daniel HonanFounder, Profitable Painter CPA PLLC · I help painting contractors increase profits & cash flow while reducing taxes♦ Bookkeeping ♦ Tax

Painting Biz Owners: Keep peace of mind by staying compliant w/IRS backup withholding, W9s, & 1099s.

Name: Painting Biz Owners: Keep peace of mind by staying compliant w/IRS backup withholding, W9s, & 1099s.
Uploaded: 2023-10-10T17:07:59+00:00
Duration: 37 s
Channel: Daniel Honan
Description: In this segment, the speakers explain key tax compliance steps for painting business owners. They describe what to do when a contractor’s Social Security…

10 Oct 2023 · 1 min

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In this segment, the speakers explain key tax compliance steps for painting business owners. They describe what to do when a contractor’s Social Security number (TIN) does not match IRS records, triggering a backup‑withholding requirement that must begin within 30 days and continue until a valid number is obtained. They stress the importance of obtaining a completed W‑9 as early as possible—refusal to provide one is a red flag—and advise filing 1099 forms promptly, ideally in January, to avoid monthly penalties that start at $50 and can increase over time. The overall message is that proactive collection of correct tax information and timely filing protect the business from IRS penalties.

Chapters

Let's say you do get a W-9 and it looks reasonable. The Social Security number has 9 digits. They're all numbers. There's no like exclamation points or letters in there and it seems legit. So you issue the 1099 at the end of the year and the IRS sends you a letter and says, hey, this number does not match this name. We don't know what this is. That happens sometimes. It's a tax identification number or TIN mismatch. And they might send you a letter saying, because we cannot match the number to the contractor, you are now required to do backup withholding and you have 30 days to start it and you have to continue to do it until we get a valid number. If that happens and you comply, then you will be protected because you are doing the right thing. But if you never get a number from the contractor, then the IRS's view is that you should have done backup withholding from the very beginning because you had no number whatsoever.
It comes down to get that W-9 as soon as you can in that process. If, if someone's refusing to fill out that information, probably they don't want to work with them unless you are comfortable paying their taxes for them. Once you get that W-9, make sure you actually file the 1099s in January so that you're not getting hit with those penalties. It is $50 a month penalty for every month it is late, uh, and I believe that can go up after a certain period of time.
So make sure those get filed.