1099-NEC payor TIN masked by hand

[nolanm]

My client receives a 1099 with the PAYER's TIN masked by hand. Has employers name, address and last 4 of social unmasked in Payers box. Employers CPA says its the clients social and client does not want it revealed, directs me to add the 1099 income directly into C vs into a 1099 tab. I can add the 1099-NEC income and Payers Name into a 1099-NEC worksheet, just leave out the TIN.

I am uncomfortable, should I be worried? I can attach a covering letter and the offending 1099 to return. Any thoughts much appreciated.

Thanks Nolan

[Accountant-Man]

Tell the CPA he should recommend the Payer get an EIN.

[MonicaG]

You do not need to input all the 1099NEC and can just include it on the gross receipts on schedule C. 

[qbteachmt]

I have a bit different take on this:

"Employers CPA says"

Your taxpayer client doesn't have an Employer, so it will help both of you if you stop referring to it as such. If Employed, that would be a W2. Your taxpayer has a Client who paid for work.

And the work hit $600, for services, so it is reportable as informational. Your taxpayer might have made $3 million, and as long as no one paid $600 or more from their business for your taxpayer's services, you would have no 1099-NEC at all. You still report all of their business income.

"its the clients social and client does not want it revealed, directs me to add the 1099 income directly into C vs into a 1099 tab"

No, you enter all of their business income.

The 1099-NEC informational reporting helps your taxpayer's client prove this is business expense, and reports to the IRS that they can expect a business tax return from your taxpayer.

And yes, people in business should get an EIN and stop using their SSN, as shown by this example.

[nolanm]

Thank you for your comments, I have entered into 1099-NEC informational. I cannot enter the social of the Payer, so have to leave it blank.

Would you attach the 1099 with the hand-masked out partial SS to the return?

I want to avoid any comeback on my client, or on myself. The 1099 is $49k by the way.

[BobKamman]

That’s showing IRS who’s boss. They issue regulations saying you can’t do that. CPA tells client to go ahead and do it anyway.

§ 301.6109–4 IRS truncated taxpayer identification numbers.

(a) In general—Definition. An IRS truncated taxpayer identification number (TTIN) is an individual’s social security number (SSN), IRS individual taxpayer identification number (ITIN), IRS adoption taxpayer identification number (ATIN), or IRS employer identification number (EIN) in which the first five digits of the nine-digit number are replaced with Xs or asterisks. The TTIN takes the same format of the identifying number it replaces, for example XXX–XX–1234 when replacing an SSN, or XX–XXX–1234 when replacing an EIN. . . .

(b) (iv) A person may not truncate its own taxpayer identifying number on any statement or other document that it furnishes to another person. For example, an employer may not truncate its EIN on a Form W–2, Wage and Tax Statement, that the employer furnishes to an employee; and a person may not truncate its TIN on a Form W–9, Request for Taxpayer Identification Number and Certification.

[MonicaG · Accepted solution]

As long as your gross receipts are more or equal to your 1099NEC amounts, you do not need to fill out the 1099 detail. The IRS already has a copy of the 1099NEC that you have, which has to be filed with the 1096 by 1/31. They have your clients SS# with the 49k. So as long as your client's schedule C has gross receipts of 49k or more, which it should, you have no need to attach the 1099NEC. Back in the day there was no 1099 fill in on the software and you entered all 1099 income on the schedule C gross receipts. As long as you are reporting the same or more income than is reported to the IRS then you are good. Hope that helps.  

[nolanm]

100% Bob, I read the same reg. I'm inclined to attach it, as this CPA was a real piece of work. But I'm trying not to be thin skinned 🙂 and Monica's comment below yours makes sense.

In 2 minds on this to be honest

[nolanm]

That does help Monica. Your point that the IRS has it makes a lot of sense.

2 weeks to stew on this.

Thanks tho

[qbteachmt]

"Would you attach the 1099 with the hand-masked out partial SS to the return?"

No. The IRS already has a copy. It isn't meaningful to the Sched C.

If your client's client had issued this 1099 and your taxpayer's tax filing never included any business income, then the IRS would have something to pay attention to.

If your taxpayer was their employee, the "employer" cannot have payroll and employee reporting using only their SSN. That changed years ago.

You are worrying needlessly, because the issuer is not your client. Give your clients better guidance, and you have nothing to worry about.