W9 and 1099

[tu-lips]

If a business receives a two party check, but the second party deposits the check, what is reported on the 1099?

[mesquitebean]

---

@ tu-lips wrote:  W9 and 1099

If a business receives a two party check, but the second party deposits the check, what is reported on the 1099?

---

That may take some more explaining for folks to understand.   Can you provide a hypothetical example of what occurred?    And by 2-party check do you mean a check with 2 names in the "Pay To", and if so, written to "Party A and Party B", or do you mean "Party A or Party B?"   It can make a difference on how many signatures are required to deposit the check.    Do both parties have a joint account together?

And what type of 1099 are you referring to, and how does it figure into the equation?  Reported by whom?

[rjs]

In addition to the questions that mesquitebean asked, please clarify your question about the 1099. First of all, what kind of 1099 are you talking about? There is no plain Form 1099. All 1099 forms have one or more letters after the 1099. Are you asking about a 1099-MISC, 1099-NEC, or some other type of 1099? There are over 20 different kinds of 1099.

Secondly, a business issues a 1099-MISC or 1099-NEC for payments that it makes, not for payments that it receives. Who is issuing the 1099 for the two-party check that the business received? The business that makes the payment issues a 1099-MISC or 1099-NEC to whoever received the payment. A 1099-MISC or 1099-NEC can only show one tax ID number for the recipient of the payment.

[tu-lips]

Scenario— .Check written to “shop and customer” for repair. Customer decides not to do repair and deposits check into personal account. Is business liable to pay taxes on those funds? W-9 is used for the business, but since the funds were not deposited by the business is the business liable for the taxes on the funds?

[NCperson]

if I understand, check is made out to Business and Customer.  The customer decides not to do the repair and the customer deposits the check back into their personal bank account????

the business did not receive any cash income nor did it have any cash expense, so nothing to report.

[tu-lips]

Not sure…overheard business person telling client he still had to pay taxes on the funds. Did not make since to me if deposited by client.

[tu-lips]

My thought as well.  Thinking of starting a business and overheard this situation Gave me pause.

[TomD8]

A 1099-MISC or 1099-NEC is completed by the payor, not by the recipient.

The IRS will expect the 1099 to be reported on the tax return of the recipient whose TIN is listed on the 1099.

[Opus 17]

---

@tu-lips wrote:

Not sure…overheard business person telling client he still had to pay taxes on the funds. Did not make since to me if deposited by client.

---

The business reports its actual income, and actual expenses, regardless of tax paperwork.  In the event the paperwork needs to be explained, it can be, but the business still only pays tax on actual income.

This sounds like auto insurance.  The insurance company determined the amount of damage and issued a check.  The shop is paid to fix the car, or the owner keeps the money and decides to drive around in a damaged car.   The insurance company would only issue a 1099-MISC to the mechanic if the mechanic was operating as a single member LLC or partnership.  (If the mechanic was organized as an S-corporation, the insurance company would not issue a 1099.)   But the mechanic gets lots of income that is not on any 1099 (all the cash and credit card payments from customers who are not using insurance).  And the mechanic should only be paying tax on their actual income.

The mechanic's accountant will take care of this.  And if the mechanic doesn't have an accountant, they need to hire one.  I don't want my car mechanic to be doing my taxes, and he shouldn't be doing his own.  And if the mechanic is not organized as an S-corporation, he should talk to a specialist about changing his business as well.