1099's Capital Gains tax & Flips

[hakrjak]

Guys -

I worked with a contractor this year who is not comfortable getting a 1099 at the end of the year for some work he did for me. I know that's how my accountant has handled a lot of guys I've used in the past. Anybody know if it would be acceptable for my taxes, if I just get him to write me a written receipt for the work he did?

i.e. "Joe Bob's Handyman Service, $6822.57"

Cheers,

- Hakrjak

 

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[Bilgefisher]

Why wouldn't he want the 1099, unless he is basically trying to get paid under the table? Am I missing something?

 

[MJ DeMarco]

So you want to conspire with him so he can avoid payment of taxes? I'm assuming Joe Bob Handyman Company doesn't exist.

 

[bflbob]

The risk is based on audit.

If you are not audited, you'll be OK.
Legally, but not morally.

But if you are audited, chances are good they'll either disallow the deduction or penalize you for the missing 1099 and impute taxes, penalty and interest on behalf of "Bob".

I have a couple issues where I hired a sub to do something minor. I didn't get any info other than their phone number at the time. Then, I lost the phone numbers. I'm at risk for these, but wouldn't do the same intentionally.

 

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[Kung Fu Steve]

I would avoid it as much as possible. I have personally dealt with this, especially with young kids that want to get paid at the school. I don't mind paying them cash but I tell them up front they will need to do a 1099, it's usually the parents that flip out about it.

Put it this way: I know several club and bar owners in my neighborhood, they would let me do anything I want there, including bring in underage people to drink. I would never do this; one because I don't know many ha ha, and two because I wouldn't subject them to the risk of being fined or shut down.

The question is: is this guy so great to you that you would be willing to pay a big a$$ fine if you were audited?

 

[hakrjak]

It's none of my business if the guy pays his taxes or not, or if he's even filed taxes in the last 20 years... haha -- but I'm curious about this issue -- because I have hired a lot of subs over the years, and all I usually get are receipts. I.E. On the job I'm working on right now, I used Garcia Stucco for a $1k job, and all I have to prove that I spent that money is a hand written receipt from Joe Garcia. Same thing for 'Cheaper Than Dirt' trash hauling -- Handwritten paper receipt for $600 bucks.

What's the distinction that you have to use when it comes to getting a paper receipt, or issuing a 1099? Anybody know?

I'll run this by my accountant too and see what she thinks...

Cheers,

- Hakrjak

 

[Kung Fu Steve]

It's none of my business if the guy pays his taxes or not, or if he's even filed taxes in the last 20 years... haha -- but I'm curious about this issue -- because I have hired a lot of subs over the years, and all I usually get are receipts. I.E. On the job I'm working on right now, I used Garcia Stucco for a $1k job, and all I have to prove that I spent that money is a hand written receipt from Joe Garcia. Same thing for 'Cheaper Than Dirt' trash hauling -- Handwritten paper receipt for $600 bucks.

What's the distinction that you have to use when it comes to getting a paper receipt, or issuing a 1099? Anybody know?

I'll run this by my accountant too and see what she thinks...

Cheers,

- Hakrjak

Hm. Guess I didn't understand the question at first.

I think anything written is acceptable, maybe not completely professional, but acceptable.

Maybe make sure it has their signature on it so it would hold up in court if need be? (I can't think of a reason why though...)

 

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[bflbob]

By law, you have to issue a 1099 to anyone who performs a service for you. If you go to Lowes for material, no 1099 to Lowes. If they paint your rooms, a 1099 is needed.

The exception is if they fill out a W-9 (which they always should anyway), and provide you their taxpayer ID #, and document that they are incorporated.

You need the receipt to prove you paid them. The 1099 tells the IRS that they should be reporting what you paid them.

One more rule on this. A hand-written receipt can actually hurt you more than help. What you are doing when you pay a sub is saying that they aren't your employee. That means they are running a business.

There are a whole set of conditions that a person/company must follow to be a subcontractor. Some include:

• Do you get billed on letterhead/pre-printed invoices?
• Do they have a business phone?
• Do they have a business office?
• Do they provide their own tools and supplies?
• Do they work under your control? (Not good if they do.)
• Do they work for others?
• Do they file taxes for their business?
• Do they carry insurance?

All these things prove they are a business, not an employee. And there's a big difference to the IRS and courts.

If a business doesn't pay its taxes, it isn't your fault. But if an employee worked for you and you didn't take out taxes, you owe them. Ditto for SS. And unemployement. And much more.

It's none of my business if the guy pays his taxes or not, or if he's even filed taxes in the last 20 years... haha -- but I'm curious about this issue -- because I have hired a lot of subs over the years, and all I usually get are receipts. I.E. On the job I'm working on right now, I used Garcia Stucco for a $1k job, and all I have to prove that I spent that money is a hand written receipt from Joe Garcia. Same thing for 'Cheaper Than Dirt' trash hauling -- Handwritten paper receipt for $600 bucks.

What's the distinction that you have to use when it comes to getting a paper receipt, or issuing a 1099? Anybody know?

I'll run this by my accountant too and see what she thinks...

Cheers,

- Hakrjak

 

[hatterasguy]

A lot of those guys don't pay a lot of taxes, thats what he is trying to avoid.

I would go with whatever your accountant says, why should you stick your neck out for some sub? If the accountant says 1099 him, do so, if he balks tell him tough.