Mastering Form W-9 and 1099 Reporting to Avoid Year-End Headaches
- Will Norling
- Jan 17
- 2 min read
With the January 31st deadline looming for filing Form 1099-NEC/Misc, it is worth highlighting how and why we get the information necessary to complete the forms. Since we're at the start of the year, I want to highlight that it is absolutely necessary to get a completed W-9 from every contractor you pay and you should do it before you send them their first $1. If you have any questions about the process of collecting the W-9, filing your 1099s, or other forms (W-8 BEN), just send me a note.
What is Form W-9?
Form W-9, “Request for Taxpayer Identification Number and Certification,” is an IRS form used to collect the correct taxpayer identification number (TIN) and tax status certification from U.S. persons, including individuals, partnerships, and corporations. This form should completed by independent contractors, consultants, or vendors before they begin work or receive payment from your business. The information provided on Form W-9 enables your business to accurately report payments to the IRS and helps determine whether backup withholding is required.
If the contractor working for you is required to have funds withheld from their pay and you do not have a completed W-9 on file for the person, you could be liable for their withholding!
Why is Form W-9 Important?
Obtaining a completed Form W-9 is critical for several reasons:
It allows your business to properly complete and file IRS information returns, such as Forms 1099-NEC and 1099-MISC, which report payments made to non-employees.
It helps you avoid IRS penalties for missing or incorrect taxpayer information.
It determines whether backup withholding is required if the payee fails to provide a correct TIN or is subject to withholding due to IRS notification.
It demonstrates your due diligence in the event of an IRS inquiry or audit, showing that you made a good-faith effort to collect accurate information.
Best Practices for Requesting and Retaining Form W-9s
Always request a completed and signed Form W-9 from each contractor or consultant before making any payments.
Retain Forms W-9 for at least three years after the last payment is made, and preferably for the duration of the business relationship plus three years.
Forms W-9 may be collected and stored electronically, provided the system meets IRS standards for authenticity and security.
Review and update Forms W-9 annually, especially if there are changes in the contractor’s information or if the IRS notifies you of an incorrect TIN.
Respond promptly to any IRS notifications regarding missing or incorrect TINs to avoid penalties and backup withholding.
By following these guidelines, you help ensure your business remains compliant with IRS regulations and avoids unnecessary penalties or withholding requirements.
Want to do it by yourself? I love Track 1099 and recommend it. They were amazing before they were purchased by Avalara and now they're a bit more expensive, but it's very easy to use and still pretty cost-effective.
If you have any questions about Form W-9 or need assistance with your compliance procedures, please let us know.
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