Today TaxMama hears from Linda in the TaxQuips Forum with this concern.
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“I have a very small business teaching classes and sometimes use a local clubhouse as a venue. Some participants pay me directly; others pay the clubhouse.
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The clubhouse keeps 10% for the use of the clubhouse and sends me the rest of the money. I didn’t think they needed to send me a 1099. But they are asking for my Social Security Number.
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Do they have to send me a 1099 or is there another way?”
They are sending you the 1099-MISC because “Some participants pay me directly and other pay the clubhouse who then keep 10% for the use of the clubhouse and send me the rest.” The clubhouse is sending YOU money. Since they are issuing checks to you, they must send you the 1099-MISC.
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Anyone who wants to deduct business expenses to a service provider (like you) must issue 1099s so IRS has a record of the amount paid to the service provider. The program is specifically designed to prevent people from running businesses without reporting their income.
This is an area that IRS is looking at seriously. They have literally disallowed deductions on business audits where 1099s were not issued.
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So, give in and give up your SSN – and report all the income.
And remember, you can find answers to all kinds of questions about new tax laws, and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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4 thoughts on “Using the Clubhouse”
Thanks everyone. Yes, Chet, you can get an EIN online quite easily – https://www.irs.gov/businesses/small/article/0,,id=102767,00.html
Stan, although IRS just issued new rules about rental property owners issuing 1099s, the guidelines are really a clarification. ALL businesses have always been expected to issue 1099s to anyone providing $600 or more in services.
I have a few rentals. I do have repairs each year and wondering if I must submit a 1099 to any one person I pay more than $600 in a year. Will this requirement begin in 2011?
More and more folks will need to provide a SSN in order to get paid. If I am not mistaken, the IRS can issue an employer ID (EIN) very quickly online, for sole proprietors….can anyone clarify?
I can think of only two reasons why taxpayers do not want to receive 10099’s. Either they had no intention of reporting the income, or they are receiving some kind of subsidy, the receipt of which could imperil their continuing to receive it.