Can I deduct subcontractor expenses if I forgot to get W9 and can't issue 1099?

You're definitely in a tough spot, but it's not as hopeless as you might think. The IRS does require you to issue 1099s to subcontractors you pay $600+ during the tax year, but that doesn't automatically mean you can't deduct legitimate business expenses if you fail to do so. The key here is documentation. Even without a W9, you should keep thorough records of the transaction - the contract with the roofer, the canceled check, communications about the work, photos of the completed project, and any other evidence proving this was a genuine business expense. The IRS is primarily concerned with whether the expense was ordinary and necessary for your business, which roofing work for a general contractor certainly is. That said, you might face penalties for not filing the required 1099. The IRS can impose fines for each missing form, and they might scrutinize the deduction more closely if audited. But the penalty for not filing is separate from your ability to claim the deduction.

I ran into this exact issue last year with a plumber who didn't want to give me his info. After hours researching, I discovered taxr.ai (https://taxr.ai) which analyzes your business documents and helps determine which expenses are deductible even in tricky situations like this. It actually saved me thousands because it helped me properly document everything so I could still claim the expense legally despite not having the 1099 filed. The tool specifically checked my documentation against IRS requirements and gave me a risk assessment for each deduction. For my subcontractor without a W9, it flagged it as "higher scrutiny" but provided specific documentation recommendations that would strengthen my position if questioned. I followed their guidance and had no issues.

Just wanted to update after checking out taxr.ai from the recommendation above. Initially I was skeptical, but it was incredibly helpful for my situation. I had three subcontractors with missing paperwork and the tool actually walked me through exactly what alternative documentation to gather for each case. The risk assessment feature showed me which deductions might trigger extra scrutiny and explained why. For one contractor, it suggested I had enough supporting evidence to claim the deduction despite the missing W9 (with slightly higher audit risk), while for another it recommended I get at least partial information before filing. Honestly wish I'd known about this years ago - would have saved me so much stress and probably helped me claim deductions I was too scared to take!

I've been in construction for 15 years and this happens ALL THE TIME. Last year I spent WEEKS trying to reach the IRS for guidance on some subcontractor issues, and it was impossible to get through. Then someone recommended Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in less than 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed I could still deduct legitimate business expenses even without proper 1099s, but warned about potential penalties for the missing forms. She explained exactly what documentation I needed to keep and how to demonstrate these were ordinary and necessary business expenses. Honestly changed my whole perspective on dealing with the IRS - they were actually incredibly helpful once I could actually talk to someone!

I have to eat my words about that Claimyr service. After posting my skeptical comment, I decided to try it because I was desperate to talk to someone about a missing 1099-K issue that's been holding up my return. Not only did it work, but I got connected to an IRS agent who was actually incredibly helpful. She pulled up my file, confirmed exactly what I needed to do, and even helped me understand how to document everything properly. Took about 35 minutes of wait time (which I didn't have to sit through) instead of the 3+ hours I wasted trying on my own last week. Honestly never thought I'd be recommending an IRS-related service, but if you need actual answers from a real person, it's worth every penny just for the time saved.

Everybody's giving advice about documentation, but let's get real - you also need to protect yourself going forward. Make it your absolute policy to NEVER pay ANY subcontractor without a W9 first. I've been burned too many times, so now I have a simple system: 1) Contract signed 2) W9 completed 3) THEN work begins It's saved me so many headaches because subs know upfront this is non-negotiable. I even have a stamp on my contracts saying "Payment requires completed W9 on file." For your current situation though - document EVERYTHING. Take screenshots of any communications where he refused to provide the W9. Keep all evidence of the work completed. And file Form 8300 if the payment was over $10k cash equivalent.

Just to add something important - if you decide to claim the deduction without filing the 1099, make sure you're still reporting it correctly on your Schedule C. You'd include it in the appropriate expense category (probably "Contract labor" on line 11) regardless of whether you issued a 1099. The potential penalties for not filing the required 1099 are separate from your ability to deduct the expense. Current penalties are $280 per form for failure to file, but can increase if the IRS determines there was intentional disregard of filing requirements. Obviously not ideal, but sometimes better to pay a penalty than lose a legitimate business deduction worth thousands!

You're absolutely right to be concerned, but you can still claim this deduction with proper documentation. The IRS doesn't automatically disallow legitimate business expenses just because you failed to file a 1099 - these are two separate issues. Here's what you need to do: 1. **Document everything thoroughly**: Keep the canceled check, contract, photos of completed work, any text messages or emails about the project, and write a detailed memo explaining the circumstances (including his refusal to provide W9 info). 2. **Report the expense correctly**: Include it on Schedule C line 11 (Contract labor) when you file your return. The expense is deductible regardless of 1099 filing status. 3. **Be prepared for potential penalties**: You may face a $280 penalty for each missing 1099, but this is often less than the tax savings from claiming the legitimate deduction. 4. **Consider backup withholding**: For future reference, if a contractor refuses to provide their TIN, you're supposed to withhold 24% of payments and send it to the IRS. Obviously too late for this situation, but good to know going forward. The key is that you genuinely attempted to get the required information and have solid proof this was a legitimate business expense. Keep excellent records and consider consulting a tax professional if you're audited, but don't let fear of the 1099 issue cost you a valid deduction.

I've been following this thread and wanted to add a perspective from someone who went through an IRS audit over a similar situation. About two years ago, I got audited and one of the items they questioned was a $6,200 payment to a contractor where I couldn't produce a 1099. The auditor was actually pretty reasonable about it. What saved me was having excellent documentation - I had the contract, photos of the work (before/during/after), the canceled check, and most importantly, a written record of my attempts to get the contractor's information. I even had screenshots of text messages where he refused to provide his SSN. The auditor told me that the IRS sees this situation more often than you'd think, especially in construction and home services. They're mainly looking for two things: 1) Was this a legitimate business expense? and 2) Did you make good faith efforts to comply with reporting requirements? I ended up paying the $280 penalty for the missing 1099, but I got to keep the full deduction. The tax savings from the deduction were about $1,500, so it was still a net positive. The auditor even gave me some tips for better record-keeping going forward. Bottom line: Don't let fear of the penalty stop you from claiming a legitimate business expense. Just make sure your documentation is rock solid.