What Happens If a Contractor Won’t Provide SSN for 1099?

When a contractor won’t provide an SSN for a 1099, you don’t get to skip the filing and you don’t get to keep paying them in full. Federal law puts the next move on you: request the number in writing, start withholding 24% of every payment, file the Form 1099-NEC with the TIN field blank, and deposit the withheld tax with the IRS. Do those four things and the paper trail protects you. Skip them and the unpaid tax becomes your bill, not the contractor’s.

Ask for a Form W-9 First

Form W-9 is the standard IRS tool for collecting a contractor’s taxpayer identification number, legal name, and business type.¹ The TIN itself can be a Social Security number, an individual taxpayer identification number, or an employer identification number, depending on how the contractor is set up.² Ideally you collect it before the first payment goes out.

If the contractor says they’ve applied for a TIN but don’t have it yet, the W-9 instructions let them write “Applied For” in the TIN field, sign the form, and return it. That doesn’t buy them (or you) any breathing room on nonemployee compensation. The 60-day grace period that applies to interest and dividend accounts doesn’t extend to 1099-NEC payments, so backup withholding starts right away and runs until the real number arrives.²

Put Every Request in Writing

If the contractor ignores the W-9 or refuses outright, your protection against later penalties is documentation. The IRS will only waive information-return penalties if you can show you acted in a “responsible manner” trying to get the number, and Treasury regulations spell out what that looks like: an initial solicitation when the relationship begins, plus annual follow-up solicitations if the TIN is still missing.³

The initial request goes out when you open the account or start the engagement. If nothing comes back, you need at least one more annual solicitation before the end of that calendar year, and a second annual solicitation the following year if the number still hasn’t arrived. Each request should be in writing and dated. Email counts. A mailed letter, especially certified mail, is stronger evidence if you ever have to defend yourself.

Without this file, the IRS treats the missing TIN as your negligence, not the contractor’s stonewalling.

Start Withholding 24% Immediately

Once a contractor fails to furnish a TIN, federal law requires you to withhold 24% from every reportable payment you make to that person.⁴ This is backup withholding, and it is not optional. The statute applies it to every reportable payment made during the period the TIN is missing, which means from the first dollar if the contractor never handed over a number.⁵

Withholding comes off the gross payment. On a $5,000 invoice, the contractor gets $3,800 and $1,200 goes to the IRS. The same rule reaches other 1099 payment types, not just nonemployee compensation.⁴

If you don’t withhold when you were required to, the IRS holds you directly liable for the tax you should have collected, plus interest and failure-to-deposit penalties on top. This is the part businesses underestimate. Ignoring the withholding rule doesn’t just create a paperwork issue; it makes you personally responsible for the contractor’s tax bill.

Backup withholding keeps running until the contractor furnishes a valid TIN and certifies it under penalties of perjury on a new Form W-9. When the corrected form arrives, stop withholding on future payments and keep the certified W-9 in your records as proof the obligation ended.⁴

File the 1099-NEC With the TIN Field Blank

A missing TIN doesn’t excuse you from filing. You still have to issue the Form 1099-NEC and furnish a copy to the contractor by January 31 of the year following payment.⁶ When you don’t have a number, leave the TIN field blank or enter all zeros as a placeholder. The IRS will accept the return and judge the situation based on your documentation.

Any backup withholding you collected goes in Box 4 (Federal Income Tax Withheld) of the 1099-NEC.⁶ The contractor needs that figure to claim a credit on their own tax return for tax already paid on their behalf. Even if the working relationship ended badly, you’re required to send them their copy.

One filing detail: if you file 10 or more information returns of any type in a year, you have to file them electronically.⁷

Deposit the Withheld Tax and File Form 945

The 24% you held back isn’t yours to park. You must deposit it with the IRS and report it on Form 945, the annual return for withheld federal income tax from nonpayroll payments.⁸

Your deposit frequency depends on a lookback period. If the total tax reported on your Form 945 two years earlier was $50,000 or less, you deposit monthly; above that, you deposit semiweekly.⁸ All deposits must go through the Electronic Federal Tax Payment System, IRS Direct Pay, or your IRS business tax account.

Form 945 itself is due January 31 of the following year, with the deadline shifting to the next business day when January 31 falls on a weekend. If you deposited all taxes on time throughout the year, you get an extra 10 days to file.⁸

What It Costs You If You Skip Any of This

The penalties fall into two tracks: penalties for the information return and liability for the tax you failed to withhold.

Information Return Penalties

For returns due in 2026, Section 6721 imposes tiered per-return penalties on incorrect or late Forms 1099-NEC:⁹

$60 per return if corrected within 30 days of the due date
$130 per return if corrected after 30 days but by August 1
$340 per return if filed after August 1 or not filed at all
$680 per return for intentional disregard, with no annual cap

Annual caps apply to the first three tiers and are lower for small businesses (those averaging $5 million or less in gross receipts over the prior three years).⁹

Liability for the Tax You Didn’t Withhold

If backup withholding was required and you didn’t do it, the IRS treats the missing withholding as your debt. You owe the amount you should have withheld, plus interest from the dates the deposits were due, plus failure-to-deposit penalties. The IRS has been actively issuing penalty letters for backup withholding failures, and a reasonable cause defense works only if you can produce the documented solicitations.⁴

This is where businesses get burned. They pay the contractor in full, never withhold, file a 1099-NEC with no TIN, and assume the problem belongs to the contractor. It doesn’t. The IRS comes after the payer first.

What It Costs the Contractor

The contractor isn’t off the hook either. The IRS imposes a $50 penalty per failure on any payee who doesn’t furnish a correct TIN when required.¹⁰ On top of the statutory penalty, they lose control of their tax picture: 24% of their gross pay goes straight to the IRS with no deductions factored in, and they only get any overpayment back by filing a return and claiming the credit.

Explaining this to a reluctant contractor often ends the standoff. Once someone understands that a quarter of their pay is leaving the table and that they face their own IRS penalty, the W-9 usually gets signed.

If the Contractor Is a Foreign National

Sometimes a contractor who “won’t give an SSN” doesn’t have one. Nonresident aliens use Form W-8BEN (or W-8BEN-E for entities) instead of the W-9 to certify foreign status and claim any applicable tax treaty benefits. The default withholding rate on payments to foreign contractors is 30% of the gross payment, not 24%, and a treaty may reduce or eliminate it only if the W-8BEN is on file.¹¹ These payments are reported on Form 1042-S, not Form 1099-NEC. If you’re not sure which category applies, ask before you pay.

The 2026 $2,000 Threshold

For payments made in 2026, the 1099-NEC reporting threshold increased from $600 to $2,000.¹² If you pay a given contractor less than $2,000 during the calendar year, you don’t have to file a 1099-NEC and the backup withholding rules tied to it don’t kick in. If you expect payments to a contractor will cross $2,000 over the year, request the W-9 at the start. Realizing in December that you need a TIN from someone you’ve been paying since January is how the scramble starts.

1
Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification
2
Internal Revenue Service. Form W-9 (Rev. March 2024) Request for Taxpayer Identification Number and Certification
3
GovInfo. 26 CFR 301.6724-1 Reasonable Cause
4
Internal Revenue Service. Backup Withholding
5
Office of the Law Revision Counsel. 26 U.S. Code 3406 – Backup Withholding
6
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
7
Internal Revenue Service. E-file Information Returns
8
Internal Revenue Service. Instructions for Form 945 (2025)
9
Internal Revenue Service. Information Return Penalties
10
eCFR. 26 CFR 301.6723-1 – Failure To Comply With Other Information Reporting Requirements
11
Internal Revenue Service. Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
12
Internal Revenue Service. Form 1099 NEC and Independent Contractors