customer wants my SSN# so he can 10-99 me?

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1793

Senior Member
every GC i've worked for sends 1099's;...this can help determine wether the check will be cashed or deposited.

It does not matter how you handle the payment, the agency will be sending the 1099 and they don't care what you do with the payment. Any and all tax liabilities are the responsibility of the recipient.

I guess it really only becomes a problem if you are audited and your records don't match the 1099.

I know of no bank that will cash a check made out to a Company.
 
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brantmacga

Señor Member
Location
Georgia
Occupation
Electrical Monke
I know of no bank that will cash a check made out to a Company.

all banks will cash a check made out to a company as long as your company has an account there. its cashed against your own account (in case of a return) but its not recorded in the statements.
 

zappy

Senior Member
Location
CA.
I had just a regular checking account. My last name is my CO. name. I had customers just write the check, xxxx electric co. About five years later, the bank says hey you need a business account. And the only reason they finally said something was because I went inside to cash it. I never had a problem when I deposited it in the ATM.
 

knoppdude

Senior Member
Location
Sacramento,ca
I wouldn't give him your social SEC #. If he signed a contract, then he gets what he gets, you met your end of the deal. As far as I know, as a contractor, you will be paying taxes on your income, and he can write off his expenses based upon your invoice, or bill. Sounds like he is up to no good. Tell him you will talk with the IRS to clarify the matter as you were not his employee, and that you will get back to him with their response. In the mean time, tell him not to worry, that the IRS agent will know how to clear up any confusion.
 

hardworkingstiff

Senior Member
Location
Wilmington, NC
I wouldn't give him your social SEC #. If he signed a contract, then he gets what he gets, you met your end of the deal. As far as I know, as a contractor, you will be paying taxes on your income, and he can write off his expenses based upon your invoice, or bill. Sounds like he is up to no good. Tell him you will talk with the IRS to clarify the matter as you were not his employee, and that you will get back to him with their response. In the mean time, tell him not to worry, that the IRS agent will know how to clear up any confusion.

I believe the IRS will tell you to fill out the W9 form (which has a place for a SS# or EIN#). By law, I believe you are required to give this information. By law, you can't do 60 in a 55 either. It only becomes an issue if someone catches you.

I don't believe there is any hanky-panky, but for him to write off the business expense, he either has to issue a 1099, withhold taxes, or wright the check to a corporation. I guess this is one advantage to being set up as a corporation.
 

hardworkingstiff

Senior Member
Location
Wilmington, NC
I can't see why XYZ Inc can pay ABC Inc to perform a service, but can't allow Joe Blow Esq to perform the same service for the same money. It is money spent by XYZ to achieve something - the fact that XYZ spent the money, and they have a receipt to show that something has been received, shouldn't that be sufficient? Who cares who performed the service?

ABC Inc cannot cash a check, they must deposit the check. Joe Blow can cash it (at the customer's bank) and there is no record in the business accounts of any transaction. I would bet that EVERY sole proprietor has defrauded the IRS by cashing a check and not claiming it on their taxes.
 

hardworkingstiff

Senior Member
Location
Wilmington, NC
Reading this thread, it seems like there are a lot of us that deal with some really unscrupulous customers. I hope it's really not that bad (I've been lucky if it is).

My biggest problem with customer is getting the final payment, not some scam with the IRS.
 

curt swartz

Electrical Contractor - San Jose, CA
Location
San Jose, CA
Occupation
Electrical Contractor
If you fail to provide you taxpayer ID (SSN or EIN) to the company requesting it the IRS can fine you. The IRS might also decide to audit you since failing to provide the proper ID doesn't look good to them. A business should never release any funds to another business or employee until they have the proper tax ID on file.
 

ty

Senior Member
I know so.


I don't claim something to be true unless I've done it myself. I bank at 4 separate institutions all having this same policy.

Then your banks are breaking Federal Law.

IF the check is made out to a business, the check Must be deposited per Federal Law.
Even if the customer has an account at the same bank, even if there is money in the account to cover the check.

If there is an employee at a bank that is cashing a check that is made out to a company, that person could get into serious trouble.
 

mivey

Senior Member
Then your banks are breaking Federal Law.

IF the check is made out to a business, the check Must be deposited per Federal Law.
Even if the customer has an account at the same bank, even if there is money in the account to cover the check.

If there is an employee at a bank that is cashing a check that is made out to a company, that person could get into serious trouble.
Which Federal Law is that?

A bank may cash a check made out to a business if cashed by a known representative of the business. Brantmacga's bank's probably know and are familiar with business owner's personally, and this is often true in a small town. If they have questions, they may require some type of signed document that they will be not held responsible for checks cashed by certain individuals.
 

mivey

Senior Member
I appears to be a judgment call, not necessarily breaking some federal law. I can't imagine a bank would knowingly break the law.

Ty,
Let me know if you find the federal law, but here are some links I found:

Could be done with proper documentation:
http://www.bankersonline.com/operations/gurus_op0319i.html
Cashing Checks Payable To Corporations And Partnerships
by Linda Westfall
Guru bios

QUESTION: From time to time, we have clients who ask about cashing checks payable to corporations and partnerships.

ANSWER: We recommend the risks involved in cashing checks payable to corporations or partnerships be analyzed. Some reasons why a bank would not want to cash checks payable to a corporation or partnership are the following:

Training staff to understand when, who and how to honor a request for cashing items payable to a Corporation or Partnership. (Sometimes company employees have a tendency to overstep their boundaries and embezzle company funds. Training staff to realize this potential risk can be a challenge.)
The cashing of large items could require the bank to maintain a higher level of cash to meet the corporate cash demands.
If the account is on an account analysis basis, the bank could lose revenue by not recording the actual number of check items processed.
We recommend to our clients that they review their Corporate and Partnership resolutions. If the resolutions address the issue of cashing checks payable to the corporation, the bank should obtain a copy of the resolution showing who is authorized and what restrictions are in place.

The bank should also review teller procedures to make sure the tellers obtain and verify the Corporate resolution prior to cashing payable items. Any restrictions in the corporate resolution should be followed.

First published on BankersOnline.com 3/19/01

The IRS might think the bank is aiding & abetting (I don't see that would hold water with proper documentation):
http://www.bankersonline.com/compliance/gurus_cmp1203p.html
Cashing Corporate Checks
Answer by: Barbara Hurst, BOL Guru
BIO AND CONTACT INFO

Question: I work at a local community bank, where we know all of our customers real well. Question: A check payable to corporation, customer brings in to cash. He is signer on account. Is there a problem as to why we would not cash the check, since he is one of the signers.

Answer: This problem seems to pop up all over the place. The IRS takes the stance that the only good reason to cash a check payable to a corporation is to evade taxes. You should not aid and abet that particular crime! Whether you know your customer real well or not, a check payable to a corporation MUST be deposited into the corporate account in full. After it is deposited, if you wish to credit the account as a cash deposit, do so, and then let your customer write a check on the account. That way you're both safe.

First published on BankersOnline.com 12/3/01

Not illegal but can be risky:
http://www.bankersonline.com/operations/gurus_op060302g.html

Cash Back to a Business Customer
by Ken Golliher, BOL Guru
BIO AND CONTACT INFO

QUESTION: Is there an actual code or regulation regarding the ability to give less cash back on a deposit to a business customer? Should you allow the customer to receive less cash or should you only allow the customer to deposit all checks and then write a check for the cash they need. It seems most banks do not allow less cash on a business deposit, but I have not found anything that confirms in writing this practice.

ANSWER: This is from a prior post regarding the wisdom of cashing checks payable to a business. When you give cash back on a business deposit, that is exactly what you are doing:

Following are a couple links where other gurus have answered this question before:
http://www.bankersonline.com/compliance/gurus_cmp1203p.html
http://www.bankersonline.com/operations/gurus_op0319i.html

You will notice neither of the earlier respondents gave a citation to law or regulation. Like a lot of things, this is not "against the law." It's just an exceptionally poor banking practice that subjects that bank to an inordinate amount of risk.

Corporations confer power by passing resolutions and naming people to act on their behalf. There may be a resolution that says you can sign official checks up to $100,000 for your bank. However, that grant does not give you authority to make someone a loan of $2,500 even if it is secured by an own bank time deposit. Different employees have different powers. You have the power you were given, but no additional powers are implied.

The corporate employee who signs on the account (or even the owner of the corporation) does not have the power to cash checks payable to the corporation unless there is a corporate resolution that says so. (It is unlikely that any corporation would ever adopt such a resolution because it is a traceable path to theft or income tax evasion.)

If your institution knowingly allows someone to divert the funds from the true owner, you would reasonably expect to be found liable for that. If Ken came in with a check payable to Mary Beth, you would not let him sign her name and walk out the door with the proceeds. If Ken came in with a check payable to Pegasus, your analysis and the result should be identical. (If it isn't, be prepared to meet my partners under unpleasant circumstances.)

Although it is not against the law to cash a check for a corporation, there are a number of cases based on fraud and bankruptcy that indicate the bank should have known better?

First published on BankersOnline.com 6/3/02

So it would appear with proper documentation, you could have the bank cash a business check. It should be much easier with a sole proprietorship.

add: you can see their bios here: http://www.bankersonline.com//bio.html#golliher
 

ty

Senior Member
Ty,
Let me know if you find the federal law, but here are some links I found:



The IRS might think the bank is aiding & abetting (I don't see that would hold water with proper documentation):


Cashing or depositing business checks by business owners into personal accounts is possible but not recommended. Placing business funds into a personal account may send a red flag to the IRS that a business owner is hiding business funds in personal accounts. If a business owner deposits a business check into a personal account, they are not claiming these funds as personal income or reporting them as business income.

So it would appear with proper documentation, you could have the bank cash a business check. It should be much easier with a sole proprietorship.

From my bank:

One law is the US Patriot Act and the ?Know Your Customer? (KYC) provision (section 351). KYC amends the Bank Secrecy Act of 1970 (BSA) and legally REQUIRES US banks to identify their clients and record relevant information pertinent to doing financial business with them. For a ?natural person? this may include govt issued ID and a taxpayer ID number. A business is NOT a natural person. A business can NEVER produce a drivers? license and ?cash? a check.

A business (or their agent) CAN endorse a check, deposit a check, and withdraw cash from a business account?but a business itself can never, ever, walk into a bank lobby and ?cash? a check?only a natural person can. To comply with KYC a bank will usually ask you to prove the business exists, provide a tax ID number, and establish who can conduct transactions on the account. This can be as simple as a DBA sole proprietor relationship (Wendall Jones, d.b.a. Wendall Jones Dog Walking Service?and even using Wendall?s own social security number as the tax ID number.) Or it can be as complicated as a huge corporation with billions in assets. Both have to provide KYC information.

Either way, without this information on file, a bank can NOT ?Know Your Customer.? If you don?t have a business account at a bank, they WON?T have this info on file?therefore, they would be in violation of these US codes if they knowingly negotiated a check made payable to a business. Produce the documents, establish a business account, and a bank can negotiate (but not ?cash?) a check made payable to a business.
 

mivey

Senior Member
Cashing or depositing business checks by business owners into personal accounts is possible but not recommended. Placing business funds into a personal account may send a red flag to the IRS that a business owner is hiding business funds in personal accounts. If a business owner deposits a business check into a personal account, they are not claiming these funds as personal income or reporting them as business income.



From my bank:

One law is the US Patriot Act and the ?Know Your Customer? (KYC) provision (section 351). KYC amends the Bank Secrecy Act of 1970 (BSA) and legally REQUIRES US banks to identify their clients and record relevant information pertinent to doing financial business with them. For a ?natural person? this may include govt issued ID and a taxpayer ID number. A business is NOT a natural person. A business can NEVER produce a drivers? license and ?cash? a check.

A business (or their agent) CAN endorse a check, deposit a check, and withdraw cash from a business account?but a business itself can never, ever, walk into a bank lobby and ?cash? a check?only a natural person can. To comply with KYC a bank will usually ask you to prove the business exists, provide a tax ID number, and establish who can conduct transactions on the account. This can be as simple as a DBA sole proprietor relationship (Wendall Jones, d.b.a. Wendall Jones Dog Walking Service?and even using Wendall?s own social security number as the tax ID number.) Or it can be as complicated as a huge corporation with billions in assets. Both have to provide KYC information.

Either way, without this information on file, a bank can NOT ?Know Your Customer.? If you don?t have a business account at a bank, they WON?T have this info on file?therefore, they would be in violation of these US codes if they knowingly negotiated a check made payable to a business. Produce the documents, establish a business account, and a bank can negotiate (but not ?cash?) a check made payable to a business.
As shown, it can be complicated for a corporation. You could certainly have a corporate resolution that would allow the bank to cash the checks without liability, but what corporation would do that? It would certainly be a cause for suspicious activity and might trigger a SAR.

But for a SP, there is "unity of identity" in that the business and the person have the same legal identity. The problem is, how is the teller going to know that it is a SP? Like I said, much easier in a small town bank, but not necessarily a violation of any laws.
 

mivey

Senior Member
Here is a link from a website that helps MSBs stay in compliance. It states check cashing is common for a SP, but for other businesss, the entity would need to take precautions (highlights by me) :
http://www.moneyservicesbusiness.com/MSBServices/CheckCashing/BusPayee/BusPayee.html
Cashing Checks Payable to a Non-Natural Person (business)
Sometimes people present check cashers with checks payable to a business. Can or should an MSB cash checks presented by customers where the payee is a business? The short answer to "can" is yes; the answer to "should" is a bit more complicated. Protecting your business from loss begins with some questions. Is the business a sole proprietorship, a corporation, an LLC or a partnership? How do you know?

Because a business is a distinct legal entity separate and apart from its owner(s), you shouldn't ever make assumptions that the person presenting a check is authorized to cash it on behalf of the business. The only way to prevent loss is to know in advance that the person is authorized and be able to prove it

If the business is a sole proprietorship and it is the sole proprietor presenting the check, the best course of action is to confirm the entities status as a sole proprietorship and maintain a copy of the current business license. Obtain signed documentation from the sole proprietor if he or she is to authorize anyone else to cash business checks on his/her behalf. A sole proprietor might have a number of legitimate reasons for cashing a check, e.g. immediate cash availability to pay workers, sub-contractors or suppliers versus waiting on the item to clear at a bank.

In the case of a Corporation, LLC or partnership, recall that such entities confer power by passing resolutions and naming people to act on their behalf. Different people may be assigned different powers and responsibilities by the entity. Has the person presenting a check for the entity been authorized by the company? It is unlikely that any corporation will adopt such a resolution. First, corporations are less likely to have legitimate needs for cashing checks outside of the traditional banking system; and, second, if the corporation is ever audited such a resolution could potentially lead to an expanded audit as it might lead down a path to prove theft or income tax evasion.

If your company diverted funds from a true owner by cashing a check payable to John Doe to Suzy Que, you would expect to be found liable those monies. So too, you should not cash checks payable to a business without proof that the presenter is authorized to act on behalf of the company. Cashing checks for the owner of a sole proprietorship is common with proof of company status. Cashing checks for a corporation, LLC or partnership is much riskier and shouldn't be done without taking appropriate steps to manage the risk.

Remember too that you are never under any obligation to cash a check. Don't accept risks that are unacceptable to you and take steps to minimize the risks you do choose to take.
 

zappy

Senior Member
Location
CA.
Correct me if this untrue. But I don't think the IRS is trying to fry "small fish". There looking for some "big fish" to fry. Makes me hungry.:grin:
 

ty

Senior Member
Ask your CPA.

If your CPA has completed his/her required continuing education, ask what a major topic has been.

Around here, it has been about the IRS going after Sole Proprietors and small business. Looking for non-compliance.
we are 3 times as likely to be audited this year, as we were last year.
I know numerous people being randomly audited this year. They say it isn't much fun.

It appears that the Gov't is looking for every possible dollar they can muster. Which is the beginning of a totally seperate argument not fit for this forum.
 
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