Form W-9: What It Is and When to Collect It

Before you write a check to a freelancer, a consultant, a landlord, or any business that isn't a corporation, there's one piece of paper you need first: their Form W-9. It's a short, one-page IRS form that captures the information you'll need at year-end to file a 1099 and stay on the right side of IRS information-reporting rules.

The W-9 is one of those administrative chores that feels optional until it isn't. Skip it, and at January 31 you're chasing down vendors who have already moved on, guessing at TINs, and risking $310-per-form penalties for late or incorrect 1099s. Collect it up front, and the entire year-end reporting cycle becomes a database lookup.

A W-9 (officially "Request for Taxpayer Identification Number and Certification") is the form a U.S. business uses to collect a U.S. payee's legal name, business name, federal tax classification, address, and Taxpayer Identification Number (TIN) before paying them. The form is never sent to the IRS. It lives in your vendor file until you need it to prepare a 1099 or respond to an IRS notice.

This guide covers what the W-9 actually contains, exactly when in the vendor lifecycle to collect it, who is exempt, what to do if a vendor refuses, and how to use the captured information to file accurate 1099s.

What the form actually captures

A current W-9 (rev. March 2024) has seven numbered lines plus a signature block:

The IRS keeps the current form, instructions, and revision history online. Always use the form labeled "Rev. March 2024" or later; older versions are missing line 3b and may be rejected by your accounting software.

Why you collect it: the 1099 connection

The W-9 exists for one purpose: to give you the information you need to file the right 1099 at year-end. The two most common 1099s for small businesses are:

• 1099-NEC (Nonemployee Compensation): payments for services performed by someone who is not your employee. Independent contractors, freelancers, consultants, attorneys (for services), accountants. Due to the recipient and the IRS by January 31.
• 1099-MISC (Miscellaneous Information): rent paid to a landlord, prizes and awards, gross proceeds paid to an attorney (e.g. legal settlements), royalties of $10+, and a handful of other categories. Due to the recipient by January 31; to the IRS by February 28 (paper) or March 31 (electronic).

For tax years 2026 and forward, the reporting threshold for both forms is $2,000 per payee per calendar year, raised from $600 by the One Big Beautiful Bill Act of 2025. Payments made during calendar year 2025 still use the $600 threshold. Royalties on 1099-MISC remain at $10. The IRS publishes the General Instructions for Certain Information Returns annually, which is the authoritative source on which payments go on which form.

Both forms require: the payee's legal name, TIN, address, and the amount paid. The first three come from the W-9. If you don't have the W-9, you don't have a 1099, and the IRS will fine you for the missing return.

Who you need a W-9 from

Always collect a W-9 from:

• Independent contractors and freelancers (designers, developers, writers, bookkeepers, virtual assistants)
• Sole proprietors and single-member LLCs
• Partnerships and multi-member LLCs taxed as partnerships
• Landlords for office or retail space
• Attorneys, regardless of entity type (the legal-fees exception captures both 1099-NEC for services and 1099-MISC for gross proceeds)
• Any vendor where you can't tell at a glance whether they're a corporation

Usually exempt from 1099 reporting (but still collect the W-9):

• C-Corporations and S-Corporations, for most payments
• Tax-exempt organizations
• Government agencies

The exemptions in the second list are about 1099 filing, not about collecting the W-9. You still want the form in your vendor file as proof that you checked the entity type, and to catch the narrow categories (legal fees, medical and health care payments, gross proceeds to attorneys, cash payments for fish) where corporations do get 1099s.

Never collect a W-9 from:

• W-2 employees (use a W-4 instead)
• Foreign individuals or entities (use the appropriate W-8 series form: W-8BEN for foreign individuals, W-8BEN-E for foreign entities)
• Vendors you're buying physical goods from where no services are involved (Amazon, Staples, your local hardware store)

When to collect the W-9: the timeline

The single most important rule in this guide:

Collect the W-9 before you make the first payment.

Once the money has left your account, your leverage is gone. The vendor has been paid, they have no immediate reason to send you anything, and by January you're emailing a stranger asking for their SSN. Collect it up front and the rest of the year-end cycle is mechanical.

The vendor onboarding sequence

A typical clean intake looks like this:

1. Engagement decided. You agree to hire the vendor.
2. W-9 requested. Same day, as part of the standard onboarding email along with the SOW, MSA, and ACH form.
3. W-9 received and reviewed. Check that name, classification, address, and TIN are all present and the form is signed.
4. Vendor added to your accounting system. The W-9 information populates the vendor record. Attach the PDF to the record.
5. First invoice paid. Only after step 4 is complete.

If the W-9 isn't back yet when the first invoice arrives, the cleanest move is to hold the payment until it is. If a hold isn't possible, pay the invoice minus 24% backup withholding (more on that below) and release the withheld amount once the W-9 arrives, all within the same calendar year.

What about existing vendors with no W-9 on file?

Run a year-to-date payments report by vendor and request a W-9 from anyone:

• Paid more than the current-year threshold ($2,000 in 2026, $600 in 2025), or
• Paid any amount but missing a W-9 on file

Send the request in late October or early November, well ahead of the January 31 1099 deadline, with a clear deadline (e.g. "please return by December 15"). Vendors who don't respond by the deadline get backup withholding applied to their remaining payments and a follow-up in early January.

What if a vendor refuses or stops responding?

The IRS rules here are unambiguous. If you don't have a valid TIN on file when you make a payment, you are required to start backup withholding at 24% under IRC § 3406. That means:

• Withhold 24% of the payment.
• Pay the vendor the net (76%).
• Deposit the withheld amount with the IRS on the same schedule as payroll tax deposits.
• Report the withholding annually on Form 945.
• Issue a 1099 at year-end showing both the gross payment and the federal income tax withheld.

In practice, a polite email mentioning "we'll need to begin 24% backup withholding on your next payment if we don't have a signed W-9 by [date]" resolves the situation 99% of the time. The other 1% of the time, you follow through, and the vendor either provides the form or accepts the smaller check.

The IRS backup withholding page walks through the mechanics, including when withholding starts, when it stops, and how to deposit.

Common mistakes and how to avoid them

• Asking for a W-9 in January. By the time you need 1099 data, vendors have moved on. Collect at onboarding.
• Accepting an unsigned form. Without the Part II signature, the certification has no legal force. Send it back.
• Trusting the vendor's tax classification without checking line 3. A "Smith Consulting LLC" might be a sole proprietor, an S-Corp, or a C-Corp. The line 3 box tells you which 1099 (if any) to issue.
• Filing the 1099 in the vendor's DBA name instead of their legal name. The IRS matches on legal name + TIN. A DBA mismatch produces a CP2100 "B-Notice" the following year and obligates you to start backup withholding until corrected.
• Treating an LLC's EIN as a corporate EIN. Many single-member LLCs have an EIN for banking purposes but are still disregarded entities for tax. Use the EIN on the 1099 only if line 3 says the LLC is taxed as a C-Corp or S-Corp; otherwise report on the owner's name and SSN/EIN as shown on line 1.
• Discarding the W-9 after issuing the 1099. Retain the W-9 for four years after the date the form is signed (the standard IRS information-return retention period). If you receive a B-Notice, the W-9 is the document you'll reference to compose the response.
• Sending the W-9 to the IRS. It never goes to the IRS. It lives in your vendor file.

Practical workflow inside Sedna

Sedna's vendor records are designed around this exact lifecycle. The recommended pattern:

1. Create the vendor before making the first payment. Mark "1099 eligible" based on the W-9's line 3 classification.
2. Attach the signed W-9 PDF to the vendor record. Recording the TIN in the vendor's profile lets you produce 1099s at year-end without re-keying.
3. Categorize payments to a parent expense account that maps to a 1099 box (e.g. "Contract Labor" → 1099-NEC box 1; "Rent Expense" → 1099-MISC box 1; "Legal & Professional" → 1099-NEC box 1 or 1099-MISC box 10 depending on whether it's services or settlement proceeds).
4. In December, run a vendor-payment report filtered to 1099-eligible vendors and verify the totals against expectations. This is the moment to catch missing W-9s, classification mistakes, or payments coded to the wrong account.
5. In January, generate 1099s from the vendor records and ship them. Recipients by January 31; IRS copies on the schedule for your filing method.

Recording a contractor payment in Sedna is a standard journal entry: debit the relevant expense account (e.g. Contract Labor), credit the cash or bank account paid from. Backup-withheld amounts go to a liability account (e.g. "Federal Income Tax Withheld - 1099") that clears when you deposit with the IRS.

Example: $5,000 paid to a contractor with a valid W-9 on file

Example: $5,000 paid to a contractor with no W-9, subject to 24% backup withholding

The $1,200 liability sits on the balance sheet until you deposit it with the IRS, at which point it debits to zero against checking.

Quick-start checklist

• Add "send W-9" to your vendor onboarding email template
• Create a "W-9 Received" field on your vendor records
• Set a calendar reminder for early November to chase outstanding W-9s before year-end
• Make sure every vendor record has the W-9 PDF attached and the TIN entered
• Map each 1099-eligible expense account to the correct 1099 form and box
• In December, run a 1099-eligibility report and reconcile against expectations
• In January, issue 1099-NECs by the 31st and 1099-MISCs on the appropriate IRS schedule
• Retain signed W-9s for at least four years after the form was signed

Frequently asked questions

Who fills out a W-9 and who keeps it? The payee (the person or business you're paying) fills it out. The payer (you, the business issuing payment) keeps it on file. The W-9 is never sent to the IRS. It exists so you have the information you'll need to file a 1099 at year-end.

Do I need a W-9 from an LLC? Yes, and the LLC's tax classification on the W-9 determines whether you 1099 it at all. A single-member LLC that hasn't elected corporate taxation is reported using the owner's name and SSN/EIN and gets a 1099-NEC. An LLC that has elected S-Corp or C-Corp taxation is generally exempt from 1099-NEC reporting (with narrow exceptions like attorney fees and medical payments). Always read the LLC's tax classification box on line 3 before deciding.

What if a contractor refuses to give me a W-9? You're required to start backup withholding at 24% on every payment until they provide a valid TIN. You withhold the 24%, pay the contractor the net, and remit the withheld amount to the IRS on Form 945. This is rare in practice; the threat of a 24% haircut almost always produces the W-9.

Does the W-9 expire? No, but you need a new one any time the payee's information changes: name, business name, tax classification, address, or TIN. A good rule is to refresh W-9s every three years or whenever a vendor sends an updated invoice with new entity information.

Key takeaway

The W-9 is small, dull, and easy to defer, which is exactly why so many small businesses end up in a January scramble. Treat it as a hard gate on vendor onboarding: no W-9, no payment. Spend two minutes per vendor in March, and you spend zero minutes per vendor in January. Skip it, and the 1099 cycle becomes one of the most painful weeks of your fiscal year.

Related

• Journal entries explained: the mechanics of recording contractor payments and any backup withholding
• Chart of accounts setup: organizing expense accounts so each one maps cleanly to a 1099 box
• Inviting your team: the W-2 side of the same coin, for actual employees
• Accountable plans: the right way to reimburse employees for business expenses (not via 1099)

References

• About Form W-9, Request for Taxpayer Identification Number and Certification: The form itself, current instructions, and revision history
• About Form 1099-NEC, Nonemployee Compensation: For payments to independent contractors and other nonemployee service providers
• About Form 1099-MISC, Miscellaneous Information: For rent, royalties, prizes, attorney gross proceeds, and other miscellaneous payments
• General Instructions for Certain Information Returns: IRS-authoritative guidance on which payments go on which 1099 form
• Backup Withholding: When and how to withhold 24% from payees without a valid TIN
• 26 U.S.C. § 3406, Backup Withholding: The statute behind the 24% rule
• Independent Contractor or Employee?: IRS guidance on the W-2 vs. 1099 classification test