Tax question,please help.......?

Question

My husband did a side job for a person , mulching their home property......he received a ck for $200 less what the bill was for because the homeowner said he made an adjustment because he thought my husband was too high......the ck was made out to my husband with a note in the memo stating: full payment------ the homeowner sent a w9 to us as well- Do we have to fill this out?? Is it worth getting a atty?? WE are in NYS...thanks

Answer 1

Did your husband have a written contract with them?  Their just arbitrarily cutting what they had agreed to isn't right, obviously - if they thought his bid was too high they should have said so BEFORE he did the work.  But if there is no written contract, you'll have a real hard time proving what was actually owed.

As to the W-9. they are apparently planning to give him a 1099 for the amount.  It's taxable income to him in either case, so that really doesn't matter.  If they own a business though, I'm going to guess that they are planning on giving him a 1099 from the business and claiming it as a business, rather than personal expense.

Answer 2

If he does not agree to the payment amount - he should NOT cash that check.  Cashing it would be agreeing to those terms, that the money was accepted as payment in full.

If the client does not pay the agreed-upon amount, your husband may have to sue him.

The W-9 is just to verify your husband's social security number for tax purposes.  It is usually sent to self-employed people, and often states that you are not subject to backup withholding.  (In other words - you take care of sending your tax payment in to the IRS yourself).  The people sending the W-9's do so because they are going to deduct the expense on their tax return as contractor wages paid.

As long as your husband declares his income on his tax return - it really doesn't affect him.

BUT - in this particular case, I don't think I would send it to him unless he actually PAYS you.

Answer 3

I would imagine that as an independent contractor, he is under no obligation to complete the W-9 form that his customer sent him; however, he is obligated to report the amount received as income on a schedule C and to report any expenses that were incurred in the pursuit of this income.

As to suing the customer for underpaying, I would suggest that you consult with an attorney.  A lot would depend on whether or not your husband has a signed contract showing the amount due upon completion of the work.  In the absence of a written contract, I would be of the opinion that proving your case would be somewhat more complicated than if you had a written contract.

Also, I might suggest that you check to see if New York State has a small claims court, in which case you might be able to present your case to a judge without having to hire an attorney.

Whatever you ultimately decide, allow me to wish you the best of luck.

Answer 4

all income is suppose to be reported

Answer 5

These are two separate issues.

One, the W-9.  If you did work for me and I planned to deduct it on my taxes (eg, in my trade or business), I'd give you the W-9 and refuse to pay you until you returned it with your SSN.  If you don't fill out the W-9, I'm supposed to withhold 28-30% for taxes and send them in on your behalf.  (You'd see the amount withheld on the 1099-Misc I'd send you at the end of the year, but would have a delay getting the refund until the IRS could match the money to your SSN.)

I don't need the W-9 unless this *is* my trade or business.  Either your payer is running a home business or he's planning to pull a fast one on his taxes.  (This part doesn't affect you as you would include the income on your taxes no matter who paid you.)

Two, your payer is breaking the contract.  As others have said, he's pulling a fast one by dangling a payment in full check in front of you that's short by $200.  He knows you won't sue over $200 (it would cost more to sue) and just got a discount.  He doesn't care if you'd never do work for him again--he'll just hire someone else.    

You won't be taxed on the $200 you didn't get, but you get no further deduction either.

Answer 6

Mulching a private home is not a deductible expense for the homeowner.  From your information, your husband was not a domestic employee either.  

The homeowner has no reason, from the information you provided, to ask for your husband's Social Security Number, or to issue you a W-2 or 1099.    

I have a yard service, repair persons, etc. for my home, and I certainly do not issue these service providers a 1099.

By ignoring the request for your husband's tax information, you have done nothing illegal.  If your husband chooses, he can inform the homeowner that you will not provide the information.  I would not argue with this person, you have no obligation to explain anything to him.  Perhaps you could send him a bill for the remaining balance due.  If you deposit the check, right "all rights reserved" when you endorse it.

You could file a small claim against the $200 you are owed, but you would have to have written documentation etc.  Probably not worth the aggravation.