I worked on a project with a friend.  We charged another company for
our efforts -- but billed it from my friends' company. We intended to
split the profits. My "friend" deducted all gross expneses from the
proceeds. He then issued me check for my portion of the profit. My
friend would not disclose the list of expenses to me for review.
Recently, my ex-friend wanted me to fill out a W-9 form so he could
send me a 1099 form.
Can he do this and take all the expense deductions as well?   After
everything that has happened I am reluctant to give him my SS# at this
time.  Am I entitiled to decline his request?  What must I do with the
IRS?

Hi tootrusting--

If your friend makes payments in excess of $600 to you and you are not
considered an employee of his company, he must prepare Form 1099
Miscellaneous Income.  Copies of this form must be provided to the
worker and the IRS.

The IRS compares the payments shown on the information returns with
each recipient's income tax return to determine whether the payments
were reported as income.
http://www.irs.gov/businesses/small/article/0,,id=99184,00.html

However, you would have to supply him with your Social Security number
for him to be able to do this. He should have gotten that number from
you before issuing the check.

Should he not issue a 1099, you are still obligated to report the
income and pay the appropriate taxes. If your net income from
self-employment is $400 or more, you must file a return and compute
your SE tax on Schedule SE (Form 1040).

All of this is really independent of whether he (his company) deducted
expenses from the gross before determining the amount of your check.
By agreeing with him to have the contract in his company's name (and
in the absence of a seperate contract between the two of you), you
became a de facto independent contractor to his company.

You, on the other hand, could deduct any project related expenses you
incurred on your own tax return.

Your debate, it would seem, is not so much about the 1099 but about
the amount of your check. Without a formal agreement between the two
of you, it would be difficult to question that legally.  However,
should the amount in dispute be significant, then seek the advice of
an attorney.

search strategy: 1099 independent contractor; 1099 taxes; 1099 "social
security number"



Nellie Bly
Google Answers Researcher

Excellent answer.  Thank you for the help.