W-9 vs. 1099 Forms: What’s the Difference and When to Use Each
W-9 and 1099 forms are part of the same process, but they play different roles — and mixing them up creates compliance problems. Here’s how they work, when each is required, and what goes wrong when W-9 collection is skipped.
Form W-9: The Intake Form You Collect
A W-9 (Request for Taxpayer Identification Number and Certification) is a form you collect from vendors, contractors, and service providers before you pay them. You don’t file the W-9 with the IRS — you keep it in your records.
What the W-9 provides:
- Legal name (individual or entity)
- Tax classification (individual/sole proprietor, LLC, C-Corp, S-Corp, partnership, trust, etc.)
- Taxpayer Identification Number (TIN) — either SSN for individuals or EIN for entities
- Certification that the TIN is correct and the recipient is not subject to backup withholding
- Physical address
When to collect a W-9:
- Before issuing the first payment to any new contractor, vendor, or service provider
- When paying rent to a landlord ($600+ annually)
- When paying any individual or business that may require a 1099
The entity classification matters: The W-9 tells you whether the recipient is a corporation (generally exempt from 1099-NEC, with some exceptions) or an individual/LLC (generally requires a 1099-NEC if paid $600+). Without the W-9, you don’t know which rules apply.
Retention: Keep signed W-9s on file for at least 4 years after the date of the last payment. This is the substantiation if the IRS ever questions whether you had a valid TIN on file.
Form 1099: The Reporting Form You File
A 1099 is a tax information form you file with the IRS and send to the recipient to report certain types of payments. Unlike the W-9, which flows from payee to payer, the 1099 flows from payer to IRS and payee.
The 1099s most businesses file:
1099-NEC (Non-Employee Compensation): For payments of $600+ to non-employees for services. This includes freelancers, contractors, consultants, and sole proprietors. Deadline: January 31.
1099-MISC (Miscellaneous): For rents, prizes, royalties, and other non-service payments. Deadline: January 31 to recipient, March 31 to IRS (electronic).
1099-K: Filed by third-party payment networks (Stripe, PayPal, Square) to report payment card and network transactions. For 2025 tax year (filed in 2026), the threshold is $2,500. This is filed by the payment processor, not by you.
1099-INT: Filed by banks to report interest income of $10 or more.
How W-9 and 1099 Work Together
The process:
- Contractor starts working for you → you collect a W-9 before the first payment
- You make payments throughout the year → you track payments in your accounting system
- At year-end → you review total payments by payee
- For any payee who received $600+ and isn’t exempt → you prepare a 1099-NEC using the information from their W-9
- January 31 → you file the 1099-NEC with the IRS and send a copy to the contractor
Without the W-9 collected upfront, step 4 becomes a frantic process of chasing contractors for their TIN information — and some will be unresponsive. This is the primary reason 1099 season is chaotic for businesses without a W-9 collection process.
What Happens Without a Valid W-9
If you make a payment to a contractor and don’t have a valid W-9:
Backup withholding: You may be required to withhold 24% of all payments and remit it to the IRS. This is mandatory when:
- The contractor hasn’t provided a TIN
- The IRS notifies you that the TIN they provided is incorrect
- The contractor hasn’t certified that they’re not subject to backup withholding
In practice, most businesses collect W-9s before this becomes an issue — backup withholding is a pain for both payer and payee. The 24% withholding gets remitted to the IRS; the contractor then gets credit for it when they file their taxes. But it creates friction and paperwork for everyone.
Late or incorrect 1099s: Without accurate W-9 information (especially the correct TIN), your 1099 may contain errors. A 1099 with a wrong TIN can result in a penalty of $60–$330 per form.
Building a W-9 Collection Process
The most effective approach: make W-9 collection part of your new vendor/contractor onboarding, before any work begins. Options:
Manual: Send a blank W-9 via email (download from IRS.gov) and ask contractors to complete, sign, and return. File the signed W-9 in a folder organized by contractor name.
Via accounting software: QuickBooks and other platforms allow you to send W-9 requests directly to new vendors and store the signed forms within the vendor record.
Via a 1099 filing service: Services like Track1099, Tax1099, and similar platforms allow you to send W-9 requests and file 1099s from the same system, keeping everything connected.
The rule: No W-9, no payment. Stick to this rule and you’ll never have a difficult 1099 season.
Foreign Contractors: W-8 Forms Instead
For contractors or vendors who are foreign individuals or entities performing services outside the United States, collect a W-8BEN (individual) or W-8BEN-E (entity) instead of a W-9. These forms certify foreign status and typically exempt the payment from 1099 reporting and backup withholding requirements (though potentially subject to withholding for US-source income, depending on the situation and any applicable tax treaty).
Frequently Asked Questions
A contractor refuses to give me a W-9. What should I do?
If a contractor refuses to provide a W-9, you must begin backup withholding — withhold 24% of all payments and remit it to the IRS (reported on Form 945). The 24% withholding effectively gives the contractor a strong incentive to provide the W-9, since they’ll receive 24% less on every payment. In practice, when you explain that backup withholding is the alternative to providing a W-9, most contractors comply immediately. For contractors who genuinely won’t provide documentation — perhaps informal cash workers or very small operators — consider whether this vendor relationship creates compliance risk that outweighs the business benefit. For significant contractors, declining to provide a W-9 is a red flag worth investigating.
Do I need a new W-9 from contractors every year?
No — a W-9 remains valid until the information changes (name, address, TIN, tax classification) or until the contractor notifies you of a change. You keep the signed W-9 on file and use it for 1099 preparation as long as it’s current. You should request a new W-9 when: the contractor notifies you of a name change (marriage, legal name change); the contractor informs you they’ve changed their entity type (sole proprietor has formed an S-Corp, for example); the IRS notifies you of a TIN mismatch (you’ll receive a B-Notice); or the contractor requests a new form. Some businesses request updated W-9s every 3–5 years as a standard practice to ensure records are current — this is a reasonable policy for long-term contractors.
I paid contractors through PayPal and received a 1099-K. Do I still file 1099-NECs for those contractors?
Generally no, for the same payments. When payments are made through a third-party payment network like PayPal Business, Venmo Business, or Stripe, the payment processor has a 1099-K reporting obligation for qualifying payments. You don’t need to also issue a 1099-NEC for the same payments — that would result in double reporting. The practical nuance: if you paid a contractor via PayPal Friends & Family (not the business payment function), the 1099-K reporting obligation doesn’t apply to PayPal, and you would need to issue a 1099-NEC. Also: collecting a W-9 is still good practice even for contractors paid via payment apps — the W-9 gives you the contractor’s TIN in case you need to verify their identity or contact them about their 1099-K. Never skip the W-9 step even when you expect the payment processor to handle the reporting.
I forgot to collect a W-9 before paying a contractor. What do I do now?
Request it now. Send the contractor a W-9 and explain that you need it for year-end 1099 preparation. Most contractors will provide it promptly — it’s in their interest to have accurate 1099 reporting. If they’re unresponsive: send a written request noting that you’ll begin backup withholding on future payments if you don’t receive the W-9. Document your attempts to collect the W-9 — this documentation protects you if there’s ever a question about why you filed a 1099 without a confirmed TIN. For the current year’s 1099 filing, you can still prepare and file the 1099-NEC using the best information you have (name and address from your records, TIN if you collected it verbally). A 1099 filed without a TIN will result in an IRS B-Notice, which then triggers a formal TIN solicitation process.
We paid a vendor $15,000 for marketing services. They're an S-Corp. Do they get a 1099?
Generally no — S-Corps are exempt from 1099-NEC reporting. Corporations (C-Corps and S-Corps) are among the entities excluded from the 1099-NEC requirement for services payments. The W-9 they provided should indicate their tax classification as an S-Corp — that’s your documentation of the exemption. The major exception: attorneys and law firms receive a 1099 regardless of their corporate structure. So $15,000 to a marketing agency organized as an S-Corp: no 1099 required. $15,000 to a law firm organized as an S-Corp: 1099 required. This is why collecting a W-9 before payment is so valuable — it tells you whether the recipient is exempt before you’re trying to figure it out at year-end with 50 contractor records to review.