When a vendor won’t give you their tax ID number for a 1099, federal rules give you a clear path: request the number on Form W-9 in writing, follow the IRS solicitation schedule, and begin withholding 24% of every reportable payment until the vendor complies. You still file the 1099 at year-end, with the recipient’s TIN box left blank and the withheld tax reported in Box 4. Handled this way, the penalties fall on the vendor rather than on you.
Send a W-9 and Follow the Solicitation Schedule
The request has to go out on paper (or electronically) and it has to go out on time. The IRS recognizes three solicitations, and hitting each deadline is what later establishes reasonable cause if a TIN never arrives.1Internal Revenue Service. 20.1.7 Information Return Penalties – Section: 20.1.7.12.2.2 Solicitations for Missing TINs
- Initial solicitation: when you first engage the vendor or open the account. If nothing comes back, backup withholding starts on reportable payments right away.
- First annual solicitation: a written request by December 31 of the year the relationship began. For relationships that started in December, you have until January 31 of the following year.
- Second annual solicitation: another written request by December 31 of the year after the relationship began, if the TIN is still missing.
Keep copies of every request, every follow-up, and any certified mail receipts. Those records are what shield you from information return penalties if the IRS later questions a missing TIN.2Internal Revenue Service. Penalty Relief for Reasonable Cause
Form W-9 collects the vendor’s legal name, entity type, and taxpayer identification number, which is a Social Security Number for an individual or an Employer Identification Number for a business.3Internal Revenue Service. Form W-9 (Rev. March 2024) Request for Taxpayer Identification Number and Certification Nothing prevents you from making a completed W-9 a condition of releasing the first payment, and that is the cleanest way to avoid the problem entirely.
One threshold to keep in mind: for 2026, you only need a TIN for a service vendor if you expect to pay them $2,000 or more during the year, up from the previous $600 threshold.4Internal Revenue Service. Form 1099 NEC and Independent Contractors
Start Backup Withholding at 24%
Once the vendor fails to furnish a TIN after your initial solicitation, federal law requires you to deduct 24% from every reportable payment and remit it to the IRS.5Office of the Law Revision Counsel. 26 USC 3406 Backup Withholding It’s not discretionary. Calculate the 24% on the gross payment before any other deductions.
Treat the withheld funds as money you’re holding for the government. They aren’t operating cash, they can’t be used for business purposes, and you are personally responsible for depositing them on time.
What About Corporations?
Corporations are generally exempt from backup withholding, but only if they’ve documented that status on a W-9. A phone assurance doesn’t qualify. And even with a valid corporate W-9 on file, medical and healthcare payments and attorney fees remain subject to backup withholding.6Internal Revenue Service. Instructions for the Requester of Form W-9 (Rev. March 2024)
File the 1099 and Deposit the Withheld Tax
You still file a Form 1099-NEC (or 1099-MISC, depending on the payment type) at year-end. Leave the recipient’s TIN box blank and report the total backup withholding in Box 4, Federal Income Tax Withheld.7Internal Revenue Service. Topic No. 307, Backup Withholding Any time you’ve withheld backup tax, the 1099 has to be filed regardless of whether payments to the vendor reached the $2,000 reporting threshold.4Internal Revenue Service. Form 1099 NEC and Independent Contractors
All backup withholding you collected during the year is reconciled on Form 945, which covers federal income tax withheld from nonpayroll payments. The general filing deadline is January 31 of the year after the tax year, extended by about ten days if you deposited all taxes on time throughout the year. If the deadline falls on a weekend, it moves to the next business day.8Internal Revenue Service. Instructions for Form 945 (2025)
You don’t wait for the annual return to hand over the cash. Withheld taxes must be deposited electronically through EFTPS, IRS Direct Pay, or your IRS business tax account.8Internal Revenue Service. Instructions for Form 945 (2025) Deposit frequency depends on a lookback period. If your total nonpayroll tax liability was $50,000 or less during the lookback period, you’re on a monthly schedule. Above $50,000, you’re on a semiweekly schedule, and you’ll also file Form 945-A breaking out your liability by day.9Internal Revenue Service. Notice 931 (Rev. September 2025) – Deposit Requirements for Employment Taxes
If the Vendor Eventually Provides a TIN
Stop backup withholding on all future payments as soon as a valid W-9 arrives.7Internal Revenue Service. Topic No. 307, Backup Withholding You don’t refund the amounts you already withheld. Those dollars were deposited with the IRS, and the vendor claims credit for them on their own income tax return for the year the withholding took place.
If a 1099 already went out with a blank TIN box and the vendor later supplies a number, you can file a corrected return to update the record.10Internal Revenue Service. 2026 Publication 1099 General Instructions for Certain Information Returns If your documented solicitations already met the reasonable cause standard, a correction isn’t required, but filing one keeps future matching cleaner.
Penalties If You Skip the Process
Two separate failures can hit at once: filing an incorrect information return, and failing to withhold or deposit the tax you were required to collect.
Information Return Penalties
A 1099 filed with a missing TIN is technically incorrect. For returns due in 2026, the per-return penalty depends on how quickly you fix it:11Internal Revenue Service. Information Return Penalties
- Corrected within 30 days: $60 per return.
- Corrected after 30 days but by August 1: $130 per return.
- Corrected after August 1 or never filed: $340 per return.
- Intentional disregard: $680 per return, or 10% of the amount that should have been reported, whichever is greater.
Annual caps apply for most businesses. Small businesses with $5 million or less in gross receipts face maximum annual penalties ranging from $239,000 to $1,366,000 depending on correction timing. Larger businesses face caps from $683,000 to $4,098,500. There is no cap for intentional disregard.12Internal Revenue Service. 20.1.7 Information Return Penalties Documented solicitation is what keeps you out of the intentional disregard tier when a TIN never arrives.
Failure-to-Deposit Penalties
If you were required to withhold 24% and didn’t, or withheld but deposited late, a graduated penalty applies based on how late the deposit was:13Internal Revenue Service. Failure to Deposit Penalty
- 1 to 5 days late: 2% of the undeposited amount.
- 6 to 15 days late: 5%.
- More than 15 days late: 10%.
- More than 10 days after an IRS notice demanding payment: 15%.
The tiers don’t stack. A deposit 20 days late gets the 10% rate, not 2% plus 5% plus 10%.
Personal Liability
Backup withholding is a trust fund tax: it was always the government’s money you were holding temporarily. If the business fails to collect or pay it over, any person with authority over the company’s finances can be held personally liable for the full amount, plus interest.5Office of the Law Revision Counsel. 26 USC 3406 Backup Withholding The trust fund recovery penalty equals 100% of the uncollected tax, and it reaches owners, officers, and other responsible individuals regardless of the entity’s liability shield.14Office of the Law Revision Counsel. 26 USC 6672 – Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax
A vendor’s refusal creates work, but the mechanics are straightforward. Solicit in writing on the required schedule, withhold 24% without waiting for the vendor to come around, deposit and report on time, and the penalty exposure stays with the vendor.