Form W-9: TIN Verification, Backup Withholding, and 1099-NEC

Before you cut a check to an independent contractor, get a signed Form W-9 on file. That single form gives you the contractor’s legal name, entity classification, and Taxpayer Identification Number, which are the exact fields you’ll need to file Form 1099-NEC after year-end.¹ Collecting Form W-9 before issuing a 1099-NEC is the difference between a five-minute onboarding step and a January scramble to track down a contractor whose engagement may have ended months earlier.

Recent legislation raised the reporting threshold from $600 to $2,000 in nonemployee compensation paid to a person during a calendar year, with annual inflation adjustments beginning in 2027. IRS instructions may still reference the older $600 figure during the transition.² Because you rarely know at the outset whether a contractor’s total will land above or below the threshold, the safer practice is to collect the W-9 from every contractor, then decide at year-end whether a 1099-NEC is required.

What to Collect on Form W-9

The contractor fills out the form, not you. Your job is to know what a complete W-9 looks like so you can catch problems before payment goes out. You can download the current version directly from the IRS website.

Legal Name and Business Name

Line 1 must show the contractor’s legal name exactly as it appears on their income tax return. A trade name or “doing business as” name goes on line 2, never on line 1.³ Small mismatches here (a maiden name, a missing middle initial, the DBA in the wrong slot) are what later trigger IRS name/TIN mismatch notices.

Federal Tax Classification

Line 3a is where the contractor checks one box for their entity type: individual/sole proprietor, C corporation, S corporation, partnership, trust or estate, or LLC.³ This box tells you whether you’ll owe a 1099-NEC at all, so it matters as much as the TIN itself.

LLCs need one extra step. After checking the LLC box, the contractor writes a letter showing how the LLC is taxed: “C” for C corporation, “S” for S corporation, or “P” for partnership. A single-member LLC that hasn’t elected corporate treatment is a disregarded entity; it skips the LLC box entirely and instead checks the box matching its owner’s tax classification.³ If a contractor checks the LLC box and leaves the letter blank, send it back for correction. This is the single most common W-9 error.

Exempt Payee Codes

Line 4 is where exempt payees (tax-exempt organizations, government entities, and certain financial institutions) enter a code identifying their exemption.⁴ Most individual contractors leave this blank. When a code is present, note it in your records; it’s your documentation for why no 1099 was filed.

Taxpayer Identification Number

Part I asks for the nine-digit TIN. For individuals and sole proprietors, this is usually a Social Security Number. For business entities, it’s an Employer Identification Number.³ The TIN has to match the name on line 1 in IRS records. A TIN is treated as “obviously incorrect” if it has more or fewer than nine digits or contains any letters, and an obviously incorrect TIN triggers backup withholding the same way a missing one does.⁵

Signature

Part II is a signature under penalties of perjury. An unsigned W-9 is not a completed W-9. If the contractor has been notified by the IRS that they are subject to backup withholding, they must cross out item 2 of the certification before signing rather than sign the standard version.³ Refuse to process the form if the signature or date is missing.

When a W-9 Isn’t the Right Form

Form W-9 is only for U.S. persons. A foreign individual submits Form W-8BEN instead, and a foreign entity submits Form W-8BEN-E, either of which establishes foreign status and, where applicable, claims a reduced withholding rate under a tax treaty.⁶ The withholding stakes are different too. Payments to foreign persons without valid documentation are generally subject to 30% withholding on U.S.-source income at the time of payment, not 24% backup withholding at year-end.⁷ If you’re hiring across borders, sort out W-9 versus W-8 before the first payment.

When You Don’t Owe a 1099-NEC (but Still Want the W-9)

You generally do not issue a 1099-NEC for payments to a corporation, including an LLC taxed as a C or S corporation.⁸ That’s exactly why the entity box on line 3a is so important: it tells you at intake whether a 1099 obligation exists.

Two exceptions catch people out:

Payments to attorneys and law firms for services are reportable on Form 1099-NEC regardless of the firm’s corporate status.
Federal executive agency payments to corporate vendors for services are also reportable.

Even when no 1099 is required, collecting the W-9 is still worth doing. It documents the corporate status you relied on if the IRS later asks why no return was filed.

Verify the TIN Before You File

Collecting the W-9 is step one. Confirming that the name and TIN actually match IRS records is step two, and it happens before you file the 1099-NEC. The IRS TIN Matching program lets any payer listed on the IRS Payer Account File database check name/TIN combinations, either one at a time or in bulk, after enrolling through IRS e-Services.⁹ Running your contractor list through the service before January 31 catches transposed digits, outdated names, and personal SSNs used in place of a business EIN, so you can fix them with the contractor rather than through a post-filing correction.

The 1099-NEC Deadline and What Happens If the W-9 Is Wrong

Form 1099-NEC has a single January 31 deadline for both the IRS copy and the contractor’s copy, covering the prior year’s payments. If January 31 lands on a weekend or federal holiday, the deadline moves to the next business day, and there is no automatic extension.¹⁰ That tight window is the practical reason to get the W-9 up front. Chasing a TIN in late January, after the work has ended, is much harder than collecting it during onboarding.

Backup Withholding at 24%

Under 26 U.S.C. § 3406, you must withhold 24% of every payment to a contractor who fails to provide a TIN, provides an obviously incorrect TIN, or has been identified by the IRS as subject to withholding.¹¹ You don’t keep the money; you remit it to the IRS on the contractor’s behalf and report it on the year-end 1099-NEC. If you should have withheld and didn’t, you can be held liable for the amount you failed to collect. The W-9 is your protection against that personal liability.

B-Notices After the Fact

If the name and TIN on a 1099-NEC you filed don’t match IRS records, you’ll receive a CP2100 or CP2100A notice, which starts the “B-Notice” process. You send the contractor a First B-Notice with a blank W-9 requesting a corrected TIN, and if they don’t respond you must begin backup withholding within 30 business days of receiving the CP2100 notice.¹² All of this is avoidable at the front end by collecting a complete W-9 and running a TIN match before filing.

Penalties Under § 6721

Filing an incorrect or missing information return carries per-form penalties that scale with how late the fix is. For returns due in 2026, the tiers are $60 per form if corrected within 30 days of the due date, $130 per form if corrected after 30 days but by August 1, and $340 per form if corrected after August 1 or never filed.¹³ Intentional disregard is $680 per form or 10% of the amount that should have been reported, whichever is greater, with no annual cap.¹⁴ Across a roster of contractors, the arithmetic gets painful quickly.

Store W-9s Securely

A completed W-9 contains a Social Security Number or EIN, so treat it as sensitive. Limit access to the people who need it (payroll, accounts payable, your tax preparer), keep paper forms in a locked cabinet, and encrypt digital copies. If you collect W-9s by email, use password protection or encryption rather than sending the form as a plain attachment.

The IRS requires employment tax records to be kept at least four years after the tax is due or paid, whichever is later.¹⁵ Applying the same four-year floor to W-9s and related 1099 records lines up with the window during which the IRS can question your filings.

A few minutes at intake (a signed W-9, the right entity box, a matched TIN) is what makes the January 31 filing a nonevent instead of a source of penalties, withholding disputes, and B-Notice follow-up.

1
Internal Revenue Service. About Form 1099-NEC, Nonemployee Compensation
2
Office of the Law Revision Counsel. 26 U.S.C. 6041 – Returns Regarding Payments of Remuneration for Services and Direct Sales
3
Internal Revenue Service. Form W-9 – Request for Taxpayer Identification Number and Certification
4
Internal Revenue Service. Instructions for the Requester of Form W-9
5
Internal Revenue Service. Backup Withholding “B” Program
6
Internal Revenue Service. About Form W-8 BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)
7
Internal Revenue Service. Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
8
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
9
Internal Revenue Service. Taxpayer Identification Number (TIN) Matching
10
Internal Revenue Service. General Instructions for Certain Information Returns (2026)
11
Office of the Law Revision Counsel. 26 U.S.C. 3406 – Backup Withholding
12
Internal Revenue Service. Understanding Your CP2100 or CP2100A Notice
13
Internal Revenue Service. Information Return Penalties
14
Office of the Law Revision Counsel. 26 U.S.C. 6721 – Failure to File Correct Information Returns
15
Internal Revenue Service. Topic No. 305, Recordkeeping