Every January, our phones ring off the hook with the same panicked question. I need to file 1099s but I do not have W-9s from half my contractors. What do I do?
The answer is never fun. But the situation is entirely preventable.
Why W-9 Compliance Matters
Form W-9 collects a contractor's legal name, address, and taxpayer identification number. Without it, you cannot file an accurate 1099-NEC. Without an accurate 1099-NEC, you face IRS penalties and lose the ability to cleanly deduct those contractor payments.
The Year-End Checklist
Audit Your Contractor List
Pull every vendor you paid this year who is not a W-2 employee and not a corporation. For each one, verify you have a current W-9 on file. Current means the information matches what you used to pay them.Request Missing W-9s Now
Do not wait until January. Contractors are far more responsive in October than they are in late January when you are one of dozens of businesses asking for the same form. Send a polite email with a blank W-9 attached and a deadline.Verify TIN Numbers
The IRS TIN matching program lets you verify that the name and TIN on a W-9 match IRS records. A mismatch triggers a B-Notice from the IRS, which creates more paperwork and potential backup withholding at 24%.Document Your Efforts
If a contractor refuses to provide a W-9, document your requests. You are still required to file the 1099-NEC. Use the information you have and note the missing TIN. The IRS is far more understanding when you can show you made reasonable efforts.Backup Withholding
If a contractor does not provide a TIN, you are required to withhold 24% of their payments and remit it to the IRS. This is called backup withholding and it is painful for both parties. It is also a powerful motivator for getting that W-9 returned quickly.
Building a System
The real solution is to never be in this position. Require a W-9 before issuing the first payment to any contractor. Build it into your accounts payable process. No W-9, no check.
Keep W-9s organized digitally. Update them when a contractor changes their business structure or address. Review the file quarterly so year-end is a simple verification rather than a scramble.