Tax Planning/1099 misc


Hi Mr Arnoff,
I have a  Small Business, sole proprietorship Home remodeling.
I hired a guy to do some work for me as a sub contractor.
When I tried to send him the 1099 miscellaneous form, his address and EIN was fake.
His work cost me $5,000 and I paid him with checks.
How do I deal with this issue ?
Do I have to pay the taxes over that amount as if it was an earned income even though it was a business expense ?

Robert - You have learned a valuable lesson (if you didn't do it up front)...NEVER issue a check to ANYONE unless they fill out a W-9 BEFORE you ever pay them.

My advice is this: you did pay him with checks and they cleared.  If you have his invoices, you did the best you could.  If you DID get the W-9 form from him up front, you are not required to verify it, so you did all that was legally required.

I hope this helps.

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As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.


I have a 25 year background in financial services including tax, bookkeeping, insurance, real estate and securities. I was previously the Chief Financial Officer of a local and national franchise organization. I am currently semi-retired, but used to own (in partnership with another EA) an individual and small business financial engineering firm where I work with nearly 2,500 individuals and small business owners in nearly every state and almost every continent, assisting them in all aspects of their tax and financial well-being. I have prepared or reviewed more than 8,000 tax returns in my career.

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Enrolled Agent, Admitted to Practice Before the IRS, Accredited Tax Preparer, Fellow of National Tax Practice Institute, Certified QuickBooks ProAdvisor (1999-2011), Sleeter Group Certified QuickBooks Consultant, Life & Disability Insurance Agent License (California, Texas, Maine), Real Estate Agent License (California); Many years of continuing education in all these fields.

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