Why Every Business Owner Should Collect a W9 Before They Pay a Contractor a Dime
Every January, we watch the same thing happen. A business owner needs to send out 1099s, and they suddenly realize they never got a W9 from the landscaper they hired in March or the freelance designer who built their website in June. What should take an afternoon turns into two weeks of phone calls, unanswered emails, and contractors who are much harder to reach once the job is finished and the check has cleared.
The fix is simple, and it starts long before tax season.
What a W9 Actually Does
A W9 is the form a business asks a contractor, freelancer, or vendor to fill out before paying them. It captures the person's legal name, business name if they have one, address, and taxpayer identification number, whether that's a Social Security number or an EIN. Once you have that information, you can issue an accurate 1099-NEC in January for anyone you paid $600 or more during the year for services.
Without it, you're stuck guessing at a name and number the IRS will reject, or filing nothing at all and hoping it doesn't come up later.
Get It Before the First Payment, Not After the Last One
The best time to ask for a W9 is before you cut the first check, and the reason is practical rather than bureaucratic. A contractor who wants the job will fill out one page in exchange for getting paid. That same contractor, six months later with the project long finished, has no real reason to answer your email at all.
Make the W9 part of onboarding, not an afterthought. If you use a hiring or vendor agreement, attach the W9 to it. If you pay through a platform, upload it there. Either way, the form should exist before the money moves.
Who Actually Needs to Fill One Out
Most independent contractors, sole proprietors, and single-member LLCs you pay for services fall into this category. Corporations are typically the exception, with a few notable carve-outs like payments to attorneys, which still require a 1099 regardless of how the business is structured. If you're not sure whether a specific vendor needs a W9, that's a fast question to ask your tax preparer rather than a guess.
What Happens If You Skip It
Two things, and neither is good. You may be required to withhold 24 percent of the payment and send it to the IRS as backup withholding if a contractor won't provide a taxpayer ID number. And filing a 1099 with a missing or incorrect number can draw IRS notices for both you and the contractor, notices that take far longer to resolve than the form would have taken to collect in the first place. Because our team is led by an IRS Enrolled Agent, we handle situations like this regularly, and it's always easier to prevent than to fix.
A System That Takes the Scramble Out of January
Keep it simple. Before you pay anyone who isn't a W2 employee, get the W9 first. Keep a running folder, digital or physical, of every W9 you collect through the year. Check that folder once a quarter against who you've actually paid, so nothing slips through by December.
We work with business owners across Middle Tennessee year round, not just when the forms are due, and this is exactly the kind of thing we help clients stay ahead of before it turns into a January fire drill. If you want a hand getting your contractor files organized before 1099 season, give us a call.
Personalized Bookkeeping & Tax Services Mt. Juliet, TN | (615) 773-2736
