Anytime you pay an independent contractor or vendor (not your employees!), the IRS requires you to collect a W-9 from them so that you can send a 1099 at year-end.
Additionally, collecting a W-9 upfront ensures that the individuals or businesses you’re working with are legitimate and have provided accurate information for tax purposes. It also prevents potential identity fraud by requiring vendors to certify that the provided Taxpayer Identification Number (TIN) is correct.
What’s a 1099?
The IRS requires you send a 1099 to both the IRS and the vendor paid for any services rendered during the calendar year that totaled $600 or more.
1099 Deadline
1099s must be sent out no later than January 31st, and your EJM bookkeeper ensures this is done on time—if they’ve received the W-9 forms for your vendors. Keep in mind, that sending out 1099s is mandatory. If you’re unable to obtain a completed W-9 from a vendor, we will file an incomplete 1099 with the IRS. Incomplete 1099s may result in fees, and you or your CPA will still need to attest that all 1099s have been filed when completing your federal business taxes. Since filing 1099s is non-negotiable, we will proceed with filing incomplete forms by default.
When To Collect
Before remitting payment for services.
What Happens if You Don’t Collect a W-9?
If you fail to collect a W-9, the IRS may require you to withhold 24% of the vendor’s pay as “backup withholding.” This can be difficult to explain to the vendor and may create awkward situations, as well as additional administrative burdens for your business. Collecting a W-9 ensures you can make full payments to contractors without withholding issues.
Who Do You Need to Get a W-9 From?
Vendors that you pay for:
- Rent
- Services
- Repairs
- Legal & Professional Services
Subcontractors or contractors you pay for:
- Sales Commission
- Labor
- Specialized services
How to fill a W-9?
- Enter Your Name: write your full legal name as it appears on your tax return.
- Business Name (if applicable): if you operate under a business name or DBA (Doing Business As), include that in the second box.
- Choose Your Federal Tax Classification: check the box that applies to you, such as “Individual/Sole Proprietor” or “LLC.”
- Enter Your Address: provide your mailing address, including street, city, state, and zip code.
- Provide Your Taxpayer Identification Number (TIN): for individuals, this is your Social Security Number (SSN). For businesses, it’s your Employer Identification Number (EIN).
- Sign and Date the Form: at the bottom of the form, sign and date to certify that your information is correct.
Requesting a W-9 form from independent contractors, freelancers, and vendors is a small but essential step in ensuring your business remains compliant with IRS regulations. It simplifies tax reporting, helps you avoid legal or financial penalties, and ensures that your business maintains transparent, clean records.
If you want help with managing your W-9 forms or other bookkeeping tasks, EJM Bookkeeping is here to assist. Let us handle the details so you can focus on what you do best—growing your business.