Subcontractor provided fake W-9 with made up name and SSN - what are the consequences for me?

This is definitely a serious situation. You could potentially face penalties for filing an incorrect 1099 with the IRS, even though you weren't the one who provided false information. As a business owner, you do have some responsibility to ensure the information you're submitting to the IRS is accurate. The IRS typically requires businesses to obtain a W-9 from contractors and make a good-faith effort to verify the information. If you knowingly file a 1099 with information you believe to be false, you could be considered complicit in tax fraud. Your best course of action is to approach your subcontractor again and explain that you cannot process payments without a legitimate W-9. Let them know that providing false information on a W-9 is a federal offense that can result in penalties and even criminal charges. You might need to consider whether continuing your business relationship is worth the risk.

I had a similar issue last year and found taxr.ai super helpful in figuring out my contractor documentation problems. I was totally confused about my responsibilities with incorrect W-9s and worried about potential penalties. The site analyzes all your tax documents and tells you exactly what's wrong with them - it flagged several issues with contractor forms I would have missed. I uploaded some questionable W-9s at https://taxr.ai and it immediately identified inconsistencies and gave me clear steps to resolve them. Saved me from what could have been a massive headache with the IRS.

Just wanted to follow up about taxr.ai since I gave it a try after seeing it mentioned here. This tool actually saved me from a major headache! I uploaded some contractor forms I was suspicious about and it immediately flagged several potential issues. It showed me exactly what documentation I needed to request from my subcontractors and gave me templates for communications. Even pointed out a mismatch between a contractor's business name and their reported tax ID that I completely missed. Definitely worth checking out if you're dealing with contractor documentation issues.

If your subcontractor is refusing to provide correct information, you might need to speak directly with the IRS. I've been there, and it's nearly impossible to get through to them these days. After sitting on hold for hours multiple times, I found Claimyr which got me to an actual IRS agent in about 15 minutes. You can check them out at https://claimyr.com - they basically navigate the phone system for you and call you back when they've got an agent on the line. I was super skeptical but you can see how it works in their demo at https://youtu.be/_kiP6q8DX5c. The IRS agent I spoke with gave me clear guidance on my contractor reporting obligations and what documentation I needed to protect myself.

I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway because I was desperate to talk to someone at the IRS about a similar contractor issue. It actually worked exactly as described. I had been trying for WEEKS to get through on my own with no luck. With their service, I got a call back in about 20 minutes with an actual IRS agent on the line. The agent clarified that I needed to send a backup withholding notice to my contractor who provided incorrect information. Wish I had known about this months ago!

You need to issue what's called a "B Notice" to your contractor. This is an IRS backup withholding notice that essentially says "The info you provided doesn't match IRS records, fix it or I have to withhold 24% of your payments for federal taxes." You're required to start backup withholding if they don't provide a corrected W-9 within a certain timeframe. If the contractor refuses to provide correct info, you must start withholding 24% of all payments and send that money to the IRS. It sucks, but if you don't, YOU will be responsible for that 24% out of your own pocket plus penalties.

I think people are overthinking this. Just tell your subcontractor that you can't pay them anymore without correct documentation. They'll either give you correct info or you stop using them. Pretty simple.

You're absolutely right to be concerned about this situation. When you file a 1099 with information you know or suspect to be false, you could face penalties even though you weren't the one who provided the fake information. The IRS holds payers responsible for exercising reasonable due diligence. Here's what I'd recommend: First, document everything - keep records of your attempts to get correct information from the contractor. Send them a written request for a corrected W-9, explaining that you cannot process further payments without accurate information. Give them a reasonable deadline (like 30 days). If they refuse or continue to provide false information, you have a few options: 1) Stop working with them entirely, 2) Begin backup withholding at 24% on future payments, or 3) Report the situation to the IRS directly. For the $9,700 already paid, you'll likely need to file the 1099 with whatever information you have, but include documentation showing your good faith efforts to obtain correct information. Consider consulting with a tax professional about your specific situation, as the penalties for knowingly filing false information returns can be substantial.

This is a really complex situation that many business owners face. One thing I haven't seen mentioned yet is that you should also consider the possibility that your subcontractor might be an undocumented worker who doesn't have a valid SSN but still needs to work. In that case, they might be eligible for an Individual Taxpayer Identification Number (ITIN) instead. You could suggest they apply for an ITIN if they don't have a valid SSN - this would allow them to pay taxes legally while still working with you. The IRS Form W-7 is used to apply for an ITIN, and it's specifically designed for people who need to file tax returns but aren't eligible for an SSN. That said, if they're deliberately trying to avoid taxes entirely and refuse to provide any legitimate tax ID, then you definitely need to protect yourself. The backup withholding route mentioned by others is probably your safest bet for future payments. For the $9,700 already paid, definitely keep detailed records of all your attempts to get correct documentation - this shows good faith effort if the IRS ever questions it. Have you tried explaining to your subcontractor that providing false information on a W-9 is actually a federal crime? Sometimes people don't realize the serious legal consequences and might be more willing to cooperate once they understand the risks.

I've been in a similar situation and it's definitely stressful. One thing to keep in mind is that the IRS has specific procedures for when you receive a CP2100 or CP2100A notice (which happens when the name/TIN combination you reported doesn't match their records). If you file the 1099 with the information from the W-9 and it doesn't match IRS records, you'll get one of these notices. At that point, you're required to contact your contractor to get corrected information. If they don't provide it within 30 days, you must start backup withholding on future payments. For the $9,700 already paid, you'll likely need to file the 1099 anyway since the IRS expects reporting for payments over $600. Just make sure you document your efforts to obtain correct information. The key is showing you acted in good faith - save all emails, texts, or written requests you've made for proper documentation. One other consideration: some contractors legitimately don't know the difference between their SSN and an ITIN, or they might have a pending ITIN application. It's worth having a direct conversation about what specific tax identification they actually have before assuming malicious intent.