You paid an installer, a designer, or a contractor and felt at ease. Months later, you discover they never gave you their tax identification number and that the law required you to withhold 24% of each payment. That missing document is called a W-9 form , and requesting it late often costs more than requesting it on time.
Here we explain what it is, when you should request it, what exactly happens if you don't have it, and how to set up a one-time process so you don't stumble again.
What is form W-9 and what is it used for?
The W-9 ( Request for Taxpayer Identification Number and Certification ) is how a vendor or independent contractor provides you with two pieces of information in writing: their legal name and their tax identification number (TIN), which can be a Social Security number, an EIN, or an ITIN. They also certify under penalty of perjury that this number is correct and that it is not subject to additional withholding.
It's not sent to the IRS. It stays with you, on your file, and it's what allows you to correctly issue the 1099 at the end of the year. Without the W-9, you have nothing to fill out that form with.
When should you ask for it?
The short answer: before the first payment . Once the work is done and the money has been paid, your negotiating power disappears; getting a supplier to respond after they've been paid is notoriously difficult.
It's a good idea to ask for it from everyone who will be billing you as an independent contractor: contractors, freelancers, owners of other LLCs that provide you with services, landlords. It's cheaper to ask for too many than to discover in January that you're missing one.
The 24%: what happens if they don't give you the number
Here's the real cost. When the payment recipient fails to provide their TIN in the required format, the payer must apply backup withholding : withholding a fixed 24% of each reportable payment and depositing it with the IRS.
Withholding is also triggered when the IRS notifies you that the tax identification number you were given is incorrect, or when the payee fails to certify that they are not subject to withholding due to underreporting of interest or dividends. You can read the complete rules in IRS Topic 307 on Additional Withholding.
The painful part is what happens in practice: if you've already paid the supplier 100% and then the IRS demands the withholding you should have made, the difference comes out of your pocket. Not theirs.
Which payments are subject to additional withholding?
This applies to most payments reported on a Form 1099, including:
- Commissions, fees and payments for work as an independent contractor (1099-NEC).
- Rents, royalties and other income (1099-MISC).
- Card transactions and third-party payment networks (1099-K).
- Interest and dividends (1099-INT, 1099-DIV).
If you sell through payment processors, you should also understand how their own withholdings work, which are something else entirely: we explain it in rolling reserve.
If the withholding was done on you
On the other hand, if a client withheld 24%, that money isn't lost: it appears on the 1099 form they issue, and you report it as federal income tax withheld on your tax return for the year you received the income, just like payroll withholding.
There is one important exception: if you operate as a partnership or S corporation, the additional withholding can only be claimed by the partners or shareholders on their individual returns; it is not refundable to the entity.
To make that number match what you've already paid during the year, check how your estimated tax payments are calculated.
How to stop the hold once it has started
The problem is solved by addressing the root cause. If the issue was a missing or incorrect number, provide the correct name and TIN to the payer and verify that this number is correct. If you receive a second notification from the same payer, further verification of the name and number will be required.
If the issue arose from an outstanding tax return or unreported income, you must file the missing information and pay what is owed. And if you received a fine that you believe is unfair, you can file Form 843.
The five-minute process that avoids all this
- Request the W-9 form before the first payment. Make it a requirement for registering any new supplier.
- Check that the legal name and number match. The most common mistake is putting the trade name instead of the legal name.
- Keep it for as long as the business relationship lasts and a reasonable amount of time later. There's no need to send it anywhere.
- It carries a total per supplier. to find out in December who gets 1099.
- If they don't give it to you, keep 24%. And deposit it. It's inconvenient, but it's what the law requires and it protects you.
If you don't yet have an EIN for your business, start there: the step-by-step instructions for obtaining an EIN are available, and the complete tax overview can be found in US business taxes.
When you don't need the W-9
Not every payment requires a W-9 form, and asking for it in inappropriate situations only creates friction. The most common scenarios in a small business:
- Shopping for merchandise in a store. If you purchase inventory or materials from a merchant, that transaction does not generate 1099-NEC.
- Employees on payroll. They fill out the W-4, not the W-9, and their retention works under different rules.
- Foreign suppliers without a presence in the U.S. The form that corresponds there is from the W-8 series, not the W-9.
- Payments made through a third-party network (processors and platforms), because the report is done by the platform itself in a 1099-K.
Reasonable doubt is quickly resolved: if it's a service, if the person invoices on their own, and if the payment is reportable, ask for the W-9. It takes five minutes and saves you the argument in January.
The mistake we've seen most often
It's not forgetting the form. It's filling it out incorrectly. The provider writes their business's trade name on the line that asks for the legal name , or selects a tax classification that doesn't match how their company is registered. The result appears months later, when the IRS notifies them that the name and number don't match and the correction process has to begin.
The check takes thirty seconds: the name on the first line must be exactly the one that appears in the IRS records for that number. If the provider uses a business name, it goes on the second line, not the first.
Frequently Asked Questions about Form W-9
Who do I need to ask for the W-9 form?
To any person or company you pay for services and who will invoice you as an independent contractor: contractors, freelancers, landlords, and service providers.
How much does W-9 cost?
Nothing. It's downloaded for free from the IRS website and filled out by the provider, not you.
Can a supplier with an ITIN fill out the W-9 form?
Yes. The TIN can be a Social Security, an EIN, or an ITIN, depending on the provider.
What happens if I pay in cash?
The form of payment does not change the obligation. If the payment is reportable, you still need the W-9 and the same withholding rules apply.
Is the additional withholding a penalty?
No. It's an advance payment of the beneficiary's tax, which is credited on their tax return. The problem arises when the payer didn't file the return and then has to pay for it.
Review your supplier list today
Make a list of everyone who billed you this year and mark which ones you have signed W-9 forms for. Request the missing ones today: there's still time to sort it out in August; in January, when it's time to issue the 1099 forms, there won't be.
If you would prefer that we review with you how you have set up your supplier and contractor management, write to us and we'll take a look.
