Vendor Refuses to Provide Tax ID for 1099: Withholding and Penalties

When a vendor refuses to provide a tax ID for a 1099, you have a defined path: send Form W-9 in writing, follow the IRS solicitation schedule, and begin withholding 24% of every reportable payment until the number arrives. Done properly and documented, this shifts the consequences onto the vendor. Skipped or botched, it exposes your business, and sometimes you personally, to penalties that dwarf the original payment.

Send Form W-9 and Document Every Request

Form W-9 is the mechanism the IRS gives you for collecting a vendor’s name, entity type, and taxpayer identification number, which is either a Social Security Number for individuals or an Employer Identification Number for business entities.¹ The cleanest practice is to make a signed W-9 a condition of payment before any work begins. Nothing in the rules prevents you from holding the first check until the form is on file.

If the vendor ignores the request, the IRS expects you to keep asking on a specific schedule. Meeting that schedule is what establishes reasonable cause and shields you from information-return penalties later.²

Initial solicitation when you first engage the vendor or open the account. If the TIN doesn’t come back, begin backup withholding on reportable payments right away.
First annual solicitation by December 31 of the year the relationship began. For relationships that started in December, you have until January 31 of the following year.
Second annual solicitation by December 31 of the year after the relationship began if the TIN still hasn’t arrived.³

Keep copies of every request, every follow-up, and any certified mail receipts. These records are your evidence of due diligence if the IRS later asks why a TIN is missing from your filings.

Start Backup Withholding at 24% Right Away

Once a vendor fails to provide a TIN after proper solicitation, federal law requires you to deduct 24% from every reportable payment and remit it to the IRS.⁴ This is backup withholding. It isn’t discretionary, and you calculate the 24% on the gross payment before any other deductions.

Treat yourself as a collection agent in this situation. The withheld funds are federal tax receipts held in trust. They are not working capital, and they are not available for business use. You are responsible for safekeeping and timely deposit of every dollar.

For 2026, the threshold that triggers your obligation to collect a TIN and file a 1099-NEC rises to $2,000 in annual payments for services, up from the previous $600.⁵ One important carve-out: if you begin backup withholding, you must file a 1099 regardless of whether total payments reached that threshold.

A note on corporations. Corporations are generally exempt from backup withholding, but the exemption only applies if they’ve given you a completed W-9 identifying themselves as a corporation. A verbal claim doesn’t suffice. Even with a valid corporate W-9, medical and healthcare payments and attorney fees to corporations remain subject to backup withholding.⁶

Report and Deposit What You Withheld

File Form 1099-NEC (or 1099-MISC, depending on the payment type) for the vendor even without a TIN. Leave the recipient’s TIN box blank and report the backup withholding in Box 4, Federal Income Tax Withheld.⁷

At year end, reconcile all backup withholding on Form 945, which reports federal income tax withheld from nonpayroll payments. The general deadline is January 31 of the year after the tax year, with roughly a ten-day extension if you deposited every required amount on time during the year. If January 31 falls on a weekend, the deadline shifts to the next business day.⁸

You can’t hold the money until you file. Deposits happen throughout the year by electronic funds transfer through EFTPS, IRS Direct Pay, or your IRS business tax account.⁸ Deposit frequency depends on a lookback period. If your total nonpayroll tax liability was $50,000 or less during the lookback period, you deposit monthly. Above $50,000, you deposit semiweekly.⁹ Semiweekly depositors also file Form 945-A, an annual record that breaks liability down by day.

When the Vendor Finally Hands Over a TIN

If a previously uncooperative vendor eventually submits a valid W-9, stop backup withholding on all future payments.⁷ You do not refund the withheld amounts to the vendor. Those funds went to the IRS, and the vendor claims the credit on their own income tax return for the year the withholding occurred.

If you already filed a 1099 with a blank TIN and the vendor later provides one, the IRS encourages a corrected return. Correcting a missing TIN takes two filings: a voiding return that matches the original but shows zero in all dollar fields with the CORRECTED box checked, followed by a new original return with the correct TIN and the actual amounts.¹⁰ If your documented solicitations already meet the reasonable cause standard, you are not required to file corrections, but doing so updates the payee’s records and heads off future mismatches.

What It Costs to Skip Any of This

Two separate penalty regimes apply here, and they can hit at the same time: one for filing incorrect information returns, and one for failing to withhold or deposit the tax.

Information Return Penalties

A 1099 with a missing TIN is technically an incorrect information return. For returns due in 2026, the per-return penalty scales with how quickly you fix it:

Corrected within 30 days: $60 per return.
Corrected after 30 days but by August 1: $130 per return.
Corrected after August 1 or never filed: $340 per return.
Intentional disregard: $680 per return, or 10% of the amount that should have been reported, whichever is greater.¹¹

Annual caps limit total exposure for most businesses. Businesses with $5 million or less in gross receipts face maximum annual penalties ranging from $239,000 to $1,366,000 depending on correction timing. Larger businesses face caps between $683,000 and $4,098,500. Intentional disregard has no cap.¹²

The intentional disregard tier is the dangerous one. Knowing a TIN was required and not bothering to solicit it is treated very differently from a good-faith effort that fell short. Your documented W-9 requests are what keep you out of that tier.

Failure-to-Deposit Penalties

If you were supposed to withhold 24% and didn’t, or withheld but deposited late, a graduated penalty applies based on how late the deposit was:

1 to 5 days late: 2% of the undeposited amount.
6 to 15 days late: 5%.
More than 15 days late: 10%.
More than 10 days after an IRS notice demanding payment: 15%.¹³

The tiers don’t stack. A deposit that’s 20 days late is penalized at 10%, not at 2% plus 5% plus 10%.

Personal Liability

Backup withholding is a trust fund tax. The money was always the government’s, and you were only holding it. If your business fails to collect it or pay it over, any person responsible for the decision can be held personally liable for the full amount, plus interest.⁴ This is the trust fund recovery penalty, and it reaches past the corporate form to owners, officers, and anyone with authority over the company’s finances. The penalty equals 100% of the uncollected tax.¹⁴

A vendor’s refusal to cooperate creates work, but every step is defined. Solicit the W-9 on schedule, keep the paperwork, withhold the 24%, deposit and report on time, and the consequences stay with the vendor rather than falling on your business.

1
Internal Revenue Service. Form W-9 (Rev. March 2024) Request for Taxpayer Identification Number and Certification
2
Internal Revenue Service. Penalty Relief for Reasonable Cause
3
Internal Revenue Service. 20.1.7 Information Return Penalties – Section: 20.1.7.12.2.2 Solicitations for Missing TINs
4
Office of the Law Revision Counsel. 26 USC 3406 Backup Withholding
5
Internal Revenue Service. Form 1099 NEC and Independent Contractors
6
Internal Revenue Service. Instructions for the Requester of Form W-9 (Rev. March 2024)
7
Internal Revenue Service. Topic No. 307, Backup Withholding
8
Internal Revenue Service. Instructions for Form 945 (2025)
9
Internal Revenue Service. Notice 931 (Rev. September 2025) – Deposit Requirements for Employment Taxes
10
Internal Revenue Service. 2026 Publication 1099 General Instructions for Certain Information Returns
11
Internal Revenue Service. Information Return Penalties
12
Internal Revenue Service. 20.1.7 Information Return Penalties
13
Internal Revenue Service. Failure to Deposit Penalty
14
Office of the Law Revision Counsel. 26 USC 6672 – Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax