taxes, payment, contractorsI was recently involved in a business deal with two other contractors. We worked together, but as three separate contractors/freelancers. We are not in an LLC together. The total profit was $10,000 and we agree to split it 3 equal ways: $3333.33.
One of the contractors (let’s call him contractor “B”) knows the Client personally, and so had the Client write him one check for the total 10,000 amount. The client wrote the check in contractor “B”’s name.
Contractor “B” communicated to us that he does not want to get taxed on $10,000 (just $3333.33), so needs to prove that he wrote checks to us ($3333.33 x 2) and that we were paid. Contractor “B” told us he “needs our home address and social security number to file 1099’s” to prove that we got paid by him.
Does Contractor “B” really need our social security number and address to prove he paid us? He is not an LLC or business himself, but just another contractor like us; he would be writing it from his personal account.
Shouldn’t he just claim $3333.33 on his taxes and not $10,000 and be fine? Is there another way to prove he paid us beside using our social security number?
I’m trying to avoid giving out my social security number if I can.
This is why this IRS assigns you a business tax ID number. You should not have any qualms about giving this out since it is related to your business and not directly to you. An LLC is very inexpensive and worth far more than its cost in dollars from the personal protection it affords. It’s why I have an LLC and the only one who ever pays me is the LLC.
The other option, but probably too late for you, is to bill the client directly.
No I’m not a CPA, even on TV.
The 1099 form, which you can find on the IRS’ website, includes fields for both your and his SSN.
Shouldn’t he just claim $3333.33 on his taxes and not $10,000 and be fine?
If he ever gets an audit, the $10k payment he received will likely get held against him as undeclared revenue.
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