Yes — if you are going to issue a Form 1099 to a contractor, you need a completed Form W-9 from that contractor first. The W-9 is where you get the legal name, tax classification, and Taxpayer Identification Number that go on the 1099. You don’t send the W-9 to the IRS; you keep it in your records and use it to prepare the 1099 at year-end. Ask for it before or at the time of the first payment, not after the work is done.
There are a few situations where no 1099 is required at all, and in those cases you technically don’t need the W-9 either. But because you often can’t tell up front whether a payee will cross the reporting threshold or whether they’re structured as a corporation, the safe practice is to collect a W-9 from every non-employee you pay for services.
Why the W-9 Has to Come First
Form W-9 is a data-collection form. It stays in your files. The contractor fills it out with their full legal name (as it appears on their tax return), their federal tax classification (sole proprietor, partnership, C corporation, S corporation, LLC, or other), and their TIN — either a Social Security Number for an individual or an Employer Identification Number for a business. They sign Part II under penalty of perjury that the TIN is correct.
That information flows directly onto Form 1099-NEC for non-employee compensation, or Form 1099-MISC for categories like rent and prizes. If the name and TIN on the 1099 don’t match IRS records, the filing gets flagged and penalties follow. Collecting the W-9 upfront is the simplest way to avoid that. Always use the current version of the form from irs.gov, since older revisions may be rejected.
When a 1099 Isn’t Required in the First Place
Even with a signed W-9 in hand, some payments don’t need to be reported on a 1099. The common exceptions:
- Corporations. Payments to C corporations and S corporations are generally exempt from 1099 reporting. The major exception is legal services: attorneys’ fees of $2,000 or more must be reported on a 1099-NEC regardless of the law firm’s corporate structure.
- Card and third-party network payments. If you paid a contractor by credit card, PayPal, Venmo, or a similar payment network, the processor reports the payment on Form 1099-K. You should not also issue a 1099-NEC for the same payment.
- Below-threshold payments. Starting with payments made after December 31, 2025, the reporting threshold for 1099-NEC and most 1099-MISC categories is $2,000, up from $600. If a contractor received less than $2,000 from you during the 2026 calendar year, you generally don’t need to file a 1099 for that person.
Some payment types keep lower thresholds. Royalties trigger a 1099-MISC at just $10.
One important point about the threshold: it only controls when you have to report. The contractor still owes income tax on every dollar earned. And the reason to collect a W-9 from everyone anyway is that you may not know in January whether a contractor will hit $2,000 by December, and you may not know their tax classification without asking.
What Happens If the Contractor Won’t Give You a W-9
If a contractor ignores your W-9 request or provides an invalid TIN, federal law requires you to begin backup withholding at 24% of every payment to that person. This is not optional and not a negotiating tactic. The withholding continues until the contractor furnishes a valid TIN.
You report and remit backup withholding on Form 945, the annual return for nonpayroll withholding. Withheld amounts must be deposited with the IRS through electronic funds transfer during the year. If total withholding for the year stays under $2,500, you can remit the full amount with Form 945 itself. Form 945 for 2026 withholding is generally due by January 31, 2027.
The contractor is not off the hook either. A payee who fails to furnish a correct TIN when required can be penalized $50 per failure, on top of the income tax owed on the unreported earnings.
Foreign Contractors Use a Different Form
Form W-9 is only for U.S. persons, meaning citizens and resident aliens. A foreign contractor who is not a U.S. citizen or resident should instead complete Form W-8BEN (individuals) or W-8BEN-E (entities). These certify foreign status and may let the contractor claim a reduced withholding rate under a tax treaty.
Without a valid W-8BEN on file, you are required to withhold 30% of each payment from the first dollar and remit it to the IRS. Getting the correct form before the first payment matters more here than with a domestic contractor, because the withholding rate is higher and there is no threshold to fall under.
Penalties Tied to a Missing or Wrong W-9
The penalties for a late, missing, or incorrect 1099 are the same penalties triggered when you file with the wrong name or TIN because you never collected a W-9. For information returns due in 2026:
- Filed within 30 days of the deadline: $60 per form
- Filed after 30 days but by August 1: $130 per form
- Filed after August 1 or not at all: $340 per form
- Intentional disregard: $680 per form with no annual cap
A mismatched TIN is not treated as an inconsequential error, and there’s no safe harbor for getting it wrong. Annual caps apply to non-intentional penalties, with lower maximums for businesses with $5 million or less in gross receipts. Many states impose their own penalties for missing or late 1099 filings on top of the federal amounts.
Verify the TIN Before You File
A W-9 in your files doesn’t guarantee the information on it is correct. The IRS offers a free TIN Matching Program through its e-Services portal that lets you check name-and-TIN combinations against IRS records before you file. The interactive version handles up to 25 lookups at a time with instant results; the bulk version processes up to 100,000 combinations within 24 hours. Registration for e-Services is free and also gives you access to electronic filing.
Running these checks before filing season catches mismatches that would otherwise trigger penalty notices months later.
How Long to Keep the W-9
Retain each W-9 for at least four years after the last tax year in which you relied on it for reporting. If a contractor works for you across multiple years on the same W-9, the four-year clock doesn’t start until the last year you used that form to prepare a 1099.
Store the forms securely. A W-9 contains a Social Security Number or EIN, which makes it a target for identity theft. Encrypted digital storage or a locked physical filing system are both acceptable. If you collect W-9s through an online portal, make sure the transmission is encrypted and the storage meets basic security standards.