What Is a W-9 and Who Is Required to Fill It Out?

A Form W-9 is an important document used by businesses to request the taxpayer identification number (TIN) of individuals, entities, or certain types of businesses to whom they will be making payments.

When engaging with a company or project, independent contractor, freelancer, service providing vendors and suppliers, landlords, attorneys, any individual in single-member LLCs, applicable parties must complete this straightforward, one-page form which may result in the need to file a 1099.

The W-9 document gathers essential details such as their name, address, tax classification, taxpayer identification number, tax withholding requirements, and—if operating under a business or trade name—business contact information. The vendor’s signature on this form certifies the accuracy of the information provided and that they are not subject to backup withholding.

KEY TAKEAWAYS

• A W-9 form is essential for verifying the taxpayer identification of those hired by a business. This form is necessary for accurate reporting of payments a business made to the vendor, contractor, or business.
• The purpose of a W-9 IRS form is to ensure all parties are compliant with tax laws.
• A W-9 form generally applies when the applicable vendor is paid $600 or more in a calendar year.
• It's crucial to validate how payment was made — check, credit card, payment app, etc.

Here’s What We’ll Cover:

What Is a W-9 Form and When Should I Ask for One?

Do I Need to Get a W-9 from My Vendors?

Do I Ever Need to Collect a New W-9?

What Is the Difference Between W-9 and 1099?

What Is the Difference Between 1099-MISC and NEC? 

Do I Need a W-9 From Foreign Vendors?

What Do I Do With the W-9 When I Get It Back From the Vendor?

What If the Vendor Refuses to Send Me Their W-9 or I Can't Get Ahold of Them?

Where Do I Get a W-9 Form?

Final Thoughts

What is a W-9 Form and when should I ask for one?

A business should request a W-9 form from any vendor or contractor that will perform work or a service for you, as well as a landlord if you're renting space for your business. This includes—but is not limited to—self-employed individuals, freelancers, people in a single-member LLC, and anybody who is paid to work for the company (and is not an employee) for whom they are paying over $600 in one year for business purposes.

In addition to the vendor’s name and address, it also requires either a Social Security Number (SSN) or an Employer Identification Number (EIN) and their signature.

This one-page form provides the information necessary for your accountant to later report those payments to the IRS via a 1099 form.  

When is a W-9 not required?

An IRS Form W-9 is not needed if the vendor or freelancer is paid less than $600 in one year, if payments exceeding that amount were not business related, if the sale is strictly goods, or if paid solely by credit card as the credit card company issues the 1099.

How do I know if I need a W-9 from a vendor or contractor?

It is your responsibility to collect a completed W-9 if you pay $600 or more in a calendar year for services (not goods) to a vendor, supplier, independent contractor.

If in doubt, request the W-9.

Should I validate the W-9 that I collect?

It is in your best interest to ensure the TIN and other information provided are correct. You can use the IRS TIN Matching Program to verify the accuracy.

Do I need to get a W-9 from all of my vendors?

Yes. You should get a Form W-9 from vendors, independent contractors, service providers, and lessors in any business relationship where you are the payor. 

Do I ever need to collect a new W-9?

In most cases, you will be able to use the same W-9 from year to year. That said, there are certain times an updated version is necessary. In the case of independent contractors or a corporate vendor, there could be several other reasons; for example, a sole proprietor could form an LLC, or a company could change its business address, a vendor may even spin-off from another company and receive a new TIN altogether.

We recommend requesting a new W-9 every few years to make sure business records are up to date.

What is the difference between W-9 and 1099?

Form W-9 and Form 1099 serve different purposes in the U.S. tax system and are used at different stages of the payment and reporting process.

Form W-9 is typically requested at the start of a business relationship and provides the payor with the vendor’s taxpayer identification number (TIN) and certification for U.S. persons (including resident aliens) who are required to receive payments.

Form 1099 is used to report various types of income other than wages, salaries, and tips to the IRS. These are issued at the end of the year and help the IRS track income that is not subject to withholding.

What is the difference between 1099-MISC and 1099-NEC?

The main difference between Form 1099-MISC and Form 1099-NEC is associated with the types of income that they report and the specific types of payments they are used for:

1099-MISC (Miscellaneous Income) was historically used to report various types of income, including non-employee compensation (such as fees, commissions, prizes, and awards) and rents.

Form 1099-MISC now primarily reports other types of income such as royalties, medical and healthcare payments, crop insurance proceeds, payments to attorneys, and certain fishing boat proceeds.

1099-NEC (Nonemployee Compensation) was introduced starting with tax year 2020 to separate the reporting of non-employee compensation (NEC) from other miscellaneous income.

This is specifically used to report payments of $600 or more made to independent contractors, freelancers, and other self-employed individuals for services rendered.

NEC includes fees, commissions, prizes, and awards for services performed by individuals who are not treated as employees.

In summary, while both forms are used to report income paid to non-employees, Form 1099-MISC now focuses on other types of miscellaneous income besides non-employee compensation, while Form 1099-NEC is specifically for reporting non-employee compensation payments.

What about foreign vendors?

Foreign vendors should instead fill out a W-8 BEN form. These forms must be kept on file and furnished if required but are not filed with the IRS alongside their domestic counterparts.

What do I do with the W-9 when I get it back from the vendor?

Maintain the W-9 forms in your records and send it to your dedicated Kaizen Staff Accountant via our secure online portal. W-9s are not submitted to the IRS but are essential for us to prepare year end 1099s.

Throughout the course of monthly work, we will identify potential candidates that may require collection of a W-9.

What if the vendor refuses to send me their W-9 or I can't get ahold of them?

It is worth considering whether you should continue conducting business with that vendor or not. If you are paying this vendor in cash and fail to collect a W-9, you will not be able to claim that expense as a deduction; this translates to additional taxable income for your business.  

If a vendor or contractor fails to provide a W-9, you may be required to withhold 24% of the payment for backup withholding and then remit it to the IRS.

It is best practice to collect a W-9 at the start of your work together, allowing you to avoid this situation entirely.

Your business is required to document all attempts to obtain W-9 information from the vendor (a minimum of three attempts). If your business fails to collect an IRS form W-9 form from a vendor, and you have paid them over $600 in one year, then your business must correctly complete a 1099-MISC form for each vendor, with penalties ranging from $50 to $270 for missing forms. The vendor may also face IRS penalties.

Where do I get a W-9 form?

Download a form directly from the IRS website.

Final Thoughts

When in doubt on whether the service provider needs to be issued a 1099 or not, collect a W-9 and your tax preparer here at Kaizen CPAs + Advisors can make the final determination for you.

It is best practice to request a W-9 before engaging in business with the vendor. Running a business involves many moving parts, and it can be easy to misplace or forget important forms like the W-9 until they are needed during tax return season. Implementing simple processes can reduce your workload and your stress level so you don’t have to scramble at year end.

If you have any questions about W-9 and 1099 requirements or any other tax forms, it's important to consult with your accountant or tax professional. 

At Kaizen, we help small to mid-sized businesses make the right decisions to grow their businesses. Click the 'Let's Chat' button below to find out if Kaizen CPAs is a good fit for your business.