Contractor refusing to complete W9

[Username is two words]

A client is in the following situation:

He hired a contractor for repairs on his rental property for a one-time job. He received a standard contract which addressed the contractor's responsibility for paying Federal and State taxes. The client forgot to get a W9 until shortly after the job was completed. At that time, he sent one to the contractor. No response.  After a month he texted the contractor and politely asked for the completed W9.

The contractor responded by lying about their agreement and attempting to extort the taxpayer, saying "that was a cash price" and "I have to send a revised invoice for an additional 15% to fill out a W9." Everything the contractor says about their arrangement is an easily-proven lie. The taxpayer has the invoices and proof he paid in full, by check and by Zelle.

He is still trying to communicate but let's say he does not receive the W9.  Does he send in a 1099 with the word "refused" in the TIN box?  Should he gross up what he paid so it includes backup withholding and pay the backup withholding?

Is there any recourse against the contractor? I realize that isn't a tax question. Unless there is a tax-related remedy?  The taxpayer got him as a reference from someone he trusts. The taxpayer deeply regrets not getting the W9 before hiring the guy. If he knew he was so unethical he would not have hired him. 20/20 hindsight.

[George4Tacks]

Do the required backup withholding. https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding#:~:text=What%20is%2....

Look at the W9 instructions for What's New https://www.irs.gov/pub/irs-pdf/iw9.pdf

Seems simple - W9? 24% withholding? Just 2 choices. 

[sjrcpa]

Me thinks the contractor has already been paid. Nothing to withhold from.

[IRonMaN]

Me thinks the IRS might be interested in the contractor’s business practices.  I would seriously think about contacting the IRS and share some of that information with them.

[George4Tacks]

Is this in California? https://www.cslb.ca.gov/Consumers/Filing_a_Complaint/

If not maybe that other state has a similar Nail His Non Licensed *** To The Wall. 

[TaxGuyBill]

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@Username is two words wrote:

He hired a contractor for repairs on his rental property

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I would first want to determine if the rental activity rises to the level of a "trade or business".  If it doesn't, then a 1099 is not required and you can ignore that mess.

[qbteachmt]

It's certainly possible it's not required to issue a 1099-NEC for this work.

Typically, not only do you not pay them the payment that puts you at or over $600, until they provide the W9, you also should have a signed lien release to avoid finding out they filed a mechanic's lien on that property.

Here's a nice explanation of the due diligence for your client to follow after-the-fact:

https://amynorthardcpa.com/contractor-refuses-w-9/

In the next round of correspondence, I would point out that a copy of these attempts will be sent to the State (if contractors are registered in your State) and to the insurance broker (assuming your client got proof of coverage for that job site). Nothing like threatening their ability to do their work elsewhere.

Also, you might be able to find their EIN from the previous referrals or even the Secretary of State's office.