Case pits privacy against tax laws

By NICHOLAS LEDDEN - The Daily Inter Lake

It was only an $85 bill.

But more was at stake than just money.

At the crux of the issue was an individual?s right to privacy under the law versus a corporation?s right to expediently do business.

Privacy won.

On May 9, 2007, piano tuner Frank Talley serviced a piano in the ballroom of Red Lion Hotel Kalispell. But Red Lion wouldn?t pay Talley until he gave them enough information, i.e. his social security number, to fill out a W-9 tax form.

The W-9 is like a W-4 for independent contractors, which are non-incorporated individuals who provide a service for a company without being an employee of that company. In this case the independent contractor was Talley, a self-employed piano tuner.

However, companies who hire independent contractors aren?t required by the IRS to file a W-9 and send the subsequent, year-end 1099 to that contractor unless the services provided in the year are greater than $600.

Red Lion argued in court Monday that the company needed Talley to fill out a W-9 before he reached the $600 threshold so they could track the dollar amount of work contracted out to him over the course of the year. To fill out that W-9 the company needed either Talley?s tax identification number, which he doesn?t have, or his social security number, which he refused to give.

?It?s the only way we can track information from the beginning,? said Gary Como, who represented Red Lion and is employed as the Kalispell hotel?s controller.

Red Lion has more than 50 locations throughout the western United States, and a centralized accounts payable department tracks expenses, Como said.

If a company doesn?t file a 1099 because they can?t track the amount they?ve paid an independent contractor, and that amount exceeds $600, they get in trouble with the IRS, he said. And the IRS isn?t known for playing nicely.

?Now all of the sudden you?re legally responsible for the 1099,? Como said. ?If we sent the IRS a form without a social security number or a federal tax identification number, I guarantee you we?ll get it right back.?

?I don?t think a company wants to be exposed like that to Uncle Sam,? he said.

And withholding payment is the only leverage a company has to compel a contractor to cough up the correct information.

?If he provides that information, we?d be happy to expedite payment to him,? Como said.

But Talley?s bill didn?t even approach $600, and Judge David Ortley ruled Monday that Red Lion couldn?t legally require confidential information from Talley, in this case his social security number, until it did. Ortley also ordered Red Lion to pay Talley.

?It?s your company policy you?re offering as a defense, really. Not the law,? Talley told the court.

?When the law requires me to give it to you, I?ll give it to you,? he said, noting that he has turned over his social security number for tax purposes to companies he has done more than $600 in tuning for.

?This is a bookkeeping problem for the corporation, not a matter for the judge,? Talley said.

Talley?s legal argument was based on breach of contract, but he doesn?t deny privacy issues were at the heart of his decision not to turn over his social security number.

?It?s just a matter of principle,? he said.

Identity theft is one threat that led Talley to keep close reign on his personal information, he said. But Red Lion?s computer system is very safe, said Como, pointing to the amount of credit card numbers they successfully guard every day.

In the end, the judge simply decided Talley deserved to get paid.

?They can?t legally refuse to pay you if you don?t give them your social security number,? Talley said.

With court costs, the total judgment was $155.21.

The decision to appeal is up to Red Lion?s corporate offices, Como said.

Reporter Nicholas Ledden can be reached at 758-4441 or by e-mail at nledden@dailyinterlake.com