When a contractor or vendor refuses to provide a W-9, you are still required to file a 1099 and report the payments you made. The IRS holds the payer responsible for obtaining taxpayer identification information, but a contractor’s refusal does not excuse you from your reporting obligations. You must begin backup withholding at a rate of 24% on future payments to that contractor and file the 1099 using the information you have available.
Key Takeaway: A contractor’s refusal to provide a W-9 does not let you off the hook. You must begin backup withholding, attempt to collect the information in writing, and still file your 1099. Failing to do so puts your business at risk for IRS penalties.
What It Is
Form W-9 (Request for Taxpayer Identification Number and Certification) is the form businesses use to collect a contractor’s or vendor’s legal name, address, and taxpayer identification number (TIN). You need this information to prepare accurate 1099 forms at the end of the year.
The W-9 is not filed with the IRS. It stays in your records. But the information on it flows directly into the 1099 forms you file with the IRS and send to the contractor.
When a contractor refuses to return a W-9, it creates a compliance problem. You cannot prepare a complete 1099 without a valid TIN. But the IRS still expects you to report the payment, and the penalties for not filing a 1099 can be significant.
Who It Applies To
This situation affects any business that pays contractors, freelancers, or vendors for services or goods. It is especially common for:
- Small business owners who hire independent contractors for project work
- Property managers who pay maintenance vendors
- Construction companies that subcontract labor
- Marketing agencies that work with freelance writers, designers, or consultants
- Medical practices that pay outside service providers
If you paid $600 or more to a non-employee during the tax year, you are required to file a 1099-NEC. That requirement exists whether or not the contractor provides a W-9.
Requirements
When a contractor or vendor refuses to provide a W-9, the IRS requires you to take specific steps.
Request the W-9 in writing. Send a formal written request for the W-9. Keep a copy of your request and any responses. This documents your good-faith effort to collect the information.
Begin backup withholding. If a contractor fails to provide a TIN, you must withhold 24% of each payment and remit it to the IRS. This is called backup withholding. You report the withheld amounts using Form 945 (Annual Return of Withheld Federal Income Tax).
File the 1099 with available information. Even without a TIN, you must file the 1099. Leave the TIN field blank or enter the information you have. The IRS may assess a penalty for a missing TIN, but the penalty for not filing the 1099 at all is usually higher.
Use IRS TIN matching. If you have a TIN but are unsure it is correct, use the IRS TIN Matching Program to verify it before filing. This can help you avoid mismatches and B-notices.
The IRS W-9 instructions provide detailed guidance on requesting and processing this form.
Common Mistakes
Businesses often mishandle the W-9 refusal situation. Here are the most common errors.
Skipping the 1099 entirely. Some businesses assume that without a W-9, they do not need to file a 1099. This is wrong. The IRS can penalize you for failure to file, even if the contractor refused to cooperate.
Not starting backup withholding. Backup withholding is not optional when a contractor refuses to provide a TIN. Failing to withhold can result in the business owing the withheld amount plus interest and penalties.
Only asking once. A single verbal request is not enough documentation. The IRS expects written requests, and in some cases, multiple follow-up attempts.
Waiting until year-end. Request the W-9 before making the first payment, not at tax time. Collecting W-9s at the start of the working relationship prevents this problem entirely.
Not keeping records. If the IRS questions why a 1099 is missing a TIN, your written requests and backup withholding records demonstrate that you took the required steps. Without documentation, you have no defense.
Best Practices
Follow these steps to protect your business when contractors are unresponsive about W-9s.
Require the W-9 before the first payment. Make it a standard part of your onboarding process. No W-9, no payment. This is the simplest way to prevent the problem.
Include a W-9 requirement in your contracts. Add a clause to your service agreements that requires the contractor to provide a completed W-9 before work begins. This sets the expectation clearly.
Send follow-up requests in writing. If a contractor does not return the W-9, follow up with a written letter or email. Keep copies of every communication.
Start backup withholding immediately. When a contractor fails to provide a TIN after your request, begin withholding 24% from each payment. Notify the contractor in writing that you are required to do so.
Consult a tax professional if needed. Complex situations, such as a contractor disputing backup withholding or providing a TIN that does not match, may require professional guidance.
Use TIN matching tools. If a contractor provides a TIN but you are unsure of its accuracy, verify it through the IRS TIN Matching Program before filing. This helps you catch mismatches early and avoid B-notices from the IRS.
Document everything. Keep a file for each contractor that includes copies of your W-9 requests, the dates they were sent, any responses received, and a record of backup withholding applied. This documentation is your best defense if the IRS questions your compliance efforts.
Educate your team. If multiple people in your organization hire or pay contractors, make sure they all understand the W-9 requirement. A missed W-9 at the start of a project creates a much bigger problem at filing time.
Understanding why collecting W-9s is critical for your business will help you set up the right processes from the start.
How WageFiling Helps
WageFiling helps businesses manage the W-9 and 1099 process efficiently. The platform supports TIN verification and electronic 1099 filing, which reduces errors caused by missing or incorrect taxpayer information.
With WageFiling, you can:
- File 1099 forms electronically, even when TIN information is incomplete.
- Generate and submit corrected 1099 forms if you obtain the W-9 after the initial filing.
- Track which contractors have and have not provided W-9 forms.
- File backup withholding reports alongside your 1099 filings.
WageFiling’s guided process walks you through each step, so you know exactly what to do when a contractor is unresponsive.
Conclusion
When a contractor refuses to provide a W-9, you still have obligations. Request the form in writing, begin backup withholding at 24%, and file the 1099 with whatever information you have. The IRS penalizes businesses that do not file, not businesses that file with missing information. Protect yourself by requiring W-9s upfront and documenting every request.
Frequently Asked Questions
Can I refuse to pay a contractor who will not provide a W-9?
Yes. There is no law requiring you to pay a contractor who refuses to provide a W-9. Many businesses add a W-9 requirement to their contracts and withhold payment until the form is received. This is the most effective way to ensure compliance.
What is the penalty for filing a 1099 without a TIN?
The IRS may assess a penalty of $60 to $330 per form for filing a 1099 with a missing or incorrect TIN. However, the penalty for not filing a 1099 at all is typically higher. Filing with available information and documenting your W-9 requests can help reduce or eliminate the penalty.
How does backup withholding work when a contractor refuses a W-9?
When a contractor does not provide a TIN, you must withhold 24% of each payment. You send the withheld amount to the IRS using Form 945. The contractor receives credit for the withheld tax on their personal tax return. Backup withholding continues until the contractor provides a valid TIN.
Disclaimer: This article is for informational purposes only and should not be considered tax, legal, or accounting advice. Consult a qualified tax professional regarding your specific situation.
