What can i do with a w-9 where the subcontractor wrote "applied" for SS#? He's a foreigner of unknown status

Question

We require w-9's since we don't withhold taxes; however this independent contractor has not given us an identification # that we can submit to the IRS, and I'm not too sure what to do about his earnings. Should I withhold them until he provides a valid #? or is there another form I need to fill out for him since he is a foreigner?

Answer 1

If he has just "applied" for SSN -- it means the person has no SSN. This means this person does not have work permit or any valid documentation acceptable to SSA. You cannot use this and submit to IRS. Wait until this person gets his SSN before working with him -- otherwise you might be fined for hiring an illegal

Otherwise read IRS Pub 515, Withholding of Tax on Nonresident Aliens & Foreign Corporations http://www.irs.gov/publications/p515/index.html

Other IRS publications that may be helpful to you are

Pub 519, U.S. Tax Guide for Aliens http://www.irs.gov/publications/p519/index.html
Pub 901, U.S. Tax Treaties http://www.irs.gov/publications/p901/index.html
Pub 1187, Specifications for Filing Forms 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, Electronically or Magnetically. http://www.irs.gov/pub/irs-pdf/p1187.pdf
Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding http://www.irs.gov/pub/irs-pdf/p1187.pdf

Answer 2

There could be a number of reasons why this person filled this out. Perhaps he just received a green card and is waiting to receive the SS# or that person will be operating under a separate entity as your contractor. For example, many individuals (national and foreigners) opt to establish single member LLC's to protect themselves from various legal issues. There is no way of knowing unless you ask him this question. There are a number of ways your employee/contractor can prove his work authorization (remember that there have been SS#'s issued previously and those individuals don't necessarily have work authorization). First, you can ask to see his green card or a work permit issued by the INS. If this person already performed work for you, you are required by law to pay him. He can sue you for withheld wages and he will win. Your responsibility to verify his employement authorization must be done before any work is completed. You can still deduct the money you pay him from your earnings, regardless if you will provide him with a 1099-MISC form. Most importantly, verify his authorization before any future work is performed.

Answer 3

Don't use or pay this individual until they provide their tax ID. If he's legally in the US, he has an SSN. If he's not legal, it's illegal for you to employ his services.