When paying someone for goods or services, all I ever hear about is distinguishing between an employee and an independent contractor. And if they are an IC, a business needs to submit a 1099 for them. But what about all the other vendors one pays such as Walmart, Amazon, etc? All the companies? People don’t get W9’s from Walmart and submit 1099’s for them. Why? Is it because they are a corporation?
Thanks,
Rick
If it’s an employee, the irs expects you to do withholding for their income taxes and to collect payments for Social Security and Medicare. None of that applies in the case of a retailer.
Right. Same with any independent contractor - no tax withholdings. But why does Joe have to get a 1099 and not Walmart?
It’s to track Joe’s income, in an attempt to limit the size of the underground economy and minimize the number of people who don’t pay taxes that they owe. Retail businesses have other reporting mechanisms that the IRS can utilize to track income.
If you, as a business, are claiming what you paid Joe as a legitimate expense that you are deducting, then Congress and the IRS want to be sure that Joe is going to declare the income he got that you claimed as a deduction.
AJ
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