Do You Need a W‑9 From a Vendor or Contractor?

Not sure if you really need a W‑9 from that vendor you just paid? It’s a common question—and skipping it can lead to IRS penalties or filing headaches down the line. Many small business owners aren’t clear on when to request a W‑9, what to do with it, or why it’s such a critical part of year-end reporting.

In this quick guide, we’ll cover when a W‑9 is required, how to handle it correctly, and the compliance mistakes small business owners can’t afford to make.

Do You Need a W‑9 From Every Vendor?

If you pay an individual, sole proprietor, or certain LLCs $600 or more in a calendar year for services, you’ll typically need to collect a W‑9 so you can issue a 1099‑NEC at year-end. W‑9s are generally only required when you’re paying for services, not goods—so if you're just purchasing parts or supplies with no services involved, a W‑9 usually isn’t necessary.

That said, it’s not always obvious who qualifies for an exemption. Some vendors may be corporations (and exempt from 1099s), but you won’t know unless you collect a completed W‑9. The form tells you how the vendor is taxed—and whether they're reportable.

Examples of vendors you should request a W‑9 from:

• Independent contractors and freelancers
• Consultants and professionals (e.g., accountants, designers)
• Single-member LLCs providing services
• Attorneys, regardless of entity type
• U.S.-based vendors that might be exempt but need to certify their status

Even if they may be exempt, request a W‑9 from vendors who:

• Are C Corporations or S Corporations
• Claim an exemption from backup withholding or 1099 reporting

What About Foreign Vendors?

If you’re paying a vendor based outside the U.S., don’t request a W‑9. Instead, they’ll need to complete Form W‑8BEN or another W‑8 form, depending on their entity type. These forms help determine whether U.S. withholding tax applies to the payment.

🔎Is that vendor really an employee in disguise? Read our article on employee misclassification.

When Do You Use a W‑9—and When Do You Send a 1099?

W‑9s and 1099s work together, but they serve very different purposes. You collect a W‑9 to get the vendor’s tax details—like their name, address, and Taxpayer Identification Number (TIN). Then, at year-end, you use that information to prepare and file a 1099‑NEC, if it’s required.

In short:

• W‑9 = Info you collect upfront
• 1099 = Info you report later

What Happens If You Don’t Collect a W‑9?

Let's say you hire a freelance graphic designer and pay them $2,500 over the course of the year—but you never collected a W‑9.

When January rolls around, you realize you don’t have the tax ID you need to file their 1099-NEC. Now you’re scrambling—and that simple oversight can lead to:

• A $60–$310 penalty per form, depending on how late you file or if you fail to file at all
• Additional IRS penalties if you can’t show you made a real effort to request the W‑9
• Backup withholding requirements—if you fail to file a required 1099-NEC, the IRS may require you to withhold 24% of all future payments (and potentially send in what you should have withheld earlier)

Even if the mistake was unintentional, the IRS rarely waives these penalties just because you didn’t know better.

🔎More on this: 1099 filing mistakes and audit triggers →

When Should You Request a W‑9?

Before payment is made. The best time to request a W‑9 is when you first engage the vendor—before any money changes hands.

Making this part of your onboarding process for vendors helps avoid delays, awkward follow-ups, or year-end surprises.

Should I collect a new W-9 every year?

You don’t need to request a new W‑9 annually. However, if the vendor changes their name, tax ID number, or business structure, you’ll need an updated form. Best practice: Request a new W‑9 every few years to keep your records current—even if nothing appears to have changed. 

You can download the official IRS Form W‑9 (PDF) directly from the IRS.

Should You Validate the W‑9 You Collect?

Yes—and here’s why: incorrect W‑9 details can lead to rejected 1099s, IRS penalties, and/or backup withholding requirements.

Use the IRS's free TIN Matching Program to confirm that the Taxpayer Identification Number (TIN) and vendor name match. Validating W‑9s before year-end helps you avoid filing errors, mismatched records, and unnecessary penalties.

What if a vendor hasn’t received their TIN yet?
If they’ve applied for a TIN but haven’t received it, they can write Applied For in the TIN field of the W‑9. They must then provide the actual number within 60 days to avoid backup withholding.

What To Do After You Collect a W‑9

W‑9s contain sensitive information like Social Security numbers or Employer Identification Numbers (EINs), so they need to be stored securely.

How To Handle and Store W‑9 Forms

1. Keep W‑9s in a secure, encrypted location—whether that's a secure file system, cloud storage, or accounting platform. 
2. Avoid sending W‑9s over unprotected email.
3. Never submit W‑9s to the IRS—they’re for your records only,
4. Use the W‑9 to complete 1099-NEC forms during tax season,
5. The W‑9 should be signed by the vendor or a responsible party—typically the business owner or someone authorized to sign tax documents,
6. Hold on to W‑9s for at least four years after your last payment to that vendor.

If you’re working with Kaizen, upload your completed Form W‑9 to your Kaizen Staff Accountant through our secure client portal. As part of our monthly accounting work, we’ll help identify vendors who may require a W‑9—so you’re covered at 1099 time.

Final Tips for Staying Compliant

  Always request a W‑9 before issuing payments

 Create a process for vendor onboarding that includes W‑9 collection

 Follow up promptly if a vendor refuses or forgets to send it

 Stay organized (obvious, I know)—your year-end tax prep will go much smoother when your documentation is complete.

 For multi-state employers, make sure your W‑9 and 1099 processes align with any state-
specific filing requirements

Even simple forms like the W‑9 can cause big headaches if they’re overlooked. Whether you're paying one contractor or coordinating payments across multiple states, it pays to have a clear process. Stay organized, ask early, and don’t wait until tax season to get things in order—you’ll save time, reduce risk, and make year-end a whole lot smoother.

💡 Want more clear answers to tricky compliance topics?
Visit our Resource Center for practical guides on W‑9s, 1099s, sales tax, and more.

👋 Still have questions or wondering if your current setup is compliant?
Schedule a discovery call and let’s walk through it together.