Stay Compliant: Your Guide to Form W-9

The filing deadline for the 2024 1099s was January 31, 2025… so why are we talking about it now?

Throughout the year, it is important to collect a Form W-9 from every new vendor before you issue any payments to them. This will save you significant time and headache next January when it’s time to issue 1099s for the 2025 tax year, but most importantly, it will keep you in compliance with IRS mandates.

Information on the types of 1099s and filing requirements can be found in our previous blog article: IMPORTANT – 2024 Federal Form 1099 reporting.

What is a Form W-9?

A Form W-9 is an IRS tax form that your vendor should supply to you upon request.  It will contain their name as shown on their tax return, type of business entity, address, and tax identification number (TIN).  The TIN can either be a Social Security Number (SSN) if the vendor is an individual or an employer identification number (EIN) if they are a business.  Even if the vendor says they are a corporation or you don’t think that the $600 reporting threshold will be met, it’s always best practice to have their W-9 on file.  Most vendors will be happy to comply with this request. (A blank W-9 form can be found here on the IRS’s website.)  A vendor can be subject to a penalty of $50 for each instance where they fail to furnish a correct TIN to a requester, unless it is due to reasonable cause and not to willful neglect.

What should you do if a vendor refuses to provide a W-9?

You must make up to three solicitations (documented in writing) for the TIN to avoid a penalty for failing to include a TIN on the Information Return:

• Initial Solicitation – Must be made when the relationship is established
• First Annual Solicitation – Must be made on or before December 31 of the year the relationship is established (for relationships established before December) or January 31 of the following year (for relationships established in the preceding December)
• Second Annual Solicitation – Must be made after the expiration of the annual solicitation period and on or before December 31 of the year immediately succeeding the calendar year in which the relationship is established.

(See IRS Publication 1586 for additional information.)

If the vendor does not provide a TIN when you initially ask for it, you must begin backup withholdings.  You are required to deduct, withhold, and deposit federal taxes to the IRS at the backup withholding rate of 24% for reportable payments.  These taxes will need to be reported annually on Form 945, Annual Return of Withheld Federal Income Tax.

You will not be able to e-file the 1099 with missing information, so you will be required to submit a paper form for that vendor.  Write the word “REFUSED” in the TIN box where there the SSN or EIN would normally go.

What are the penalties for not filing a 1099?

For 2025, the penalty for filing late depends on how many days you file past the deadline, but ranges from $60-$330 per form. The penalty for intentionally disregarding your obligation to file is $660 per form. More detailed information about penalties can be found here. It is also important to be aware of various state filing requirements and potential penalties.

Final Notes

The Herbein team would like to thank our clients for a successful 2024 1099 season.  We look forward to working with you in 2025! Whether Herbein prepares your 1099 forms, or you prepare them yourself, collecting Form W-9s from your vendors upfront will minimize your cost of compliance by reducing preparation time and avoiding penalties. If you have any questions, please feel free to contact your Herbein team member.

Article Contributed by Susan Lenz