What to Do If a Contractor Won’t Provide a W-9?

If a contractor won’t provide a W-9, keep asking in writing, hold payment if your contract allows it, and if you pay anyway, withhold 24% of every payment as backup withholding and send it to the IRS. The obligation to collect the taxpayer identification number sits with you as the payer, and if you don’t collect it and don’t withhold, your business — not the contractor — ends up on the hook for the tax, interest, and penalties.1Internal Revenue Service. Backup Withholding

Ask in Writing, and Keep Every Reply

Before anything else, build a paper trail. Request the W-9 in writing at the start of the contractor relationship, ideally before the first payment goes out. If the contractor ignores you, follow up. Save the emails, the letters, the texts. If the IRS later questions a reporting gap, those records are what stand between you and a penalty.

The IRS calls this “acting responsibly,” and it has a specific shape. You make an initial request when the relationship begins. If the TIN is still missing at year end, you send a written request by December 31. If it’s still missing the following December 31, you send another one.2eCFR. 26 CFR 301.6724-1 – Reasonable Cause Businesses that treat W-9 collection as an afterthought are the ones who lose reasonable cause arguments later.

Hold Payment If You Can

You aren’t required to pay a contractor who won’t provide tax identification. The cleanest fix is a contract clause making a completed W-9 a condition of payment, and many businesses simply hold the check until the form arrives. That one step eliminates most W-9 problems before they turn into tax problems.

If you’ve already been paying the contractor and they’ve stopped cooperating mid-relationship, holding future payments is still available to you, but you also need to start withholding on anything that does go out.

Start Backup Withholding at 24%

Once a contractor refuses to provide a TIN, backup withholding is not optional. You withhold 24% of the gross payment from every check that would otherwise be reportable on Form 1099-NEC, and you send that money to the IRS.1Internal Revenue Service. Backup Withholding The contractor’s objections don’t change your obligation. If you fail to withhold, your business is liable for the full amount you should have collected, plus interest.

The math is simple. On a $10,000 payment, the contractor gets $7,600 and $2,400 goes to the IRS. The contractor can claim that $2,400 as a credit on their own tax return, so the money isn’t lost to them — but the cash flow hit usually motivates them to produce the W-9 they wouldn’t produce for you.

Withholding continues until the contractor provides a properly completed and signed W-9 with a correct TIN, or the IRS tells you to stop.3Internal Revenue Service. Fast Facts to Help Taxpayers Understand Backup Withholding There’s no time limit. Some contractors stay under backup withholding for years because they never resolve the issue.

Deposit and Report What You Withheld

Withheld amounts go to the IRS electronically, typically through the Electronic Federal Tax Payment System. Classify the deposits as Form 945 non-payroll tax, not payroll tax.

How often you deposit depends on the amounts:4Internal Revenue Service. Instructions for Form 945 (2025)

  • Under $2,500 for the year: pay it all with your annual Form 945.
  • Prior-year Form 945 total of $50,000 or less: monthly deposits, due by the 15th of the following month.
  • Prior-year total above $50,000: semiweekly. Payments made Wednesday through Friday are due the following Wednesday; payments made Saturday through Tuesday are due the following Friday.
  • If accumulated liability hits $100,000 on any single day, deposit by the next business day.

At year end, everything you withheld gets reported on Form 945, due January 31.5Internal Revenue Service. About Form 945, Annual Return of Withheld Federal Income Tax If every required deposit was on time, you get an automatic extension to February 10.4Internal Revenue Service. Instructions for Form 945 (2025)

You still file a 1099-NEC for the contractor. Put the full gross payment in Box 1 and the amount you withheld in Box 4.6Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC The sum of your Box 4 amounts across all 1099-NECs should reconcile to your Form 945 total.

What It Costs If You Skip Withholding

Three penalty streams can hit at once.

First, if you should have been withholding and weren’t, you owe the full 24% you should have collected on every payment, plus interest. That comes out of your money, not the contractor’s.

Second, late deposits carry escalating penalties:7Internal Revenue Service. Failure to Deposit Penalty

  • 1 to 5 days late: 2% of the unpaid amount
  • 6 to 15 days late: 5%
  • More than 15 days late: 10%
  • More than 10 days after the IRS’s first notice demanding payment: 15%

Third, filing a 1099-NEC with a missing or wrong TIN brings a per-return penalty. For returns due in 2026:8Internal 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 income that should have been reported, with no cap

Ten uncorrected 1099s filed after August 1 is $3,400 in per-return penalties alone, before any backup withholding liability or interest.

Reasonable Cause If Penalties Come

The IRS can waive information return penalties if you show reasonable cause — that the failure wasn’t willful neglect. You need to show either significant mitigating factors or events beyond your control, and you have to prove you acted responsibly before and after the failure.2eCFR. 26 CFR 301.6724-1 – Reasonable Cause

For a missing TIN, acting responsibly means the solicitation schedule described earlier: an initial request at the start of the relationship, a first annual written request by December 31 of that year, and a second annual written request by December 31 of the following year if the TIN is still missing. Keep every piece of correspondence. The IRS doesn’t take your word that you asked.

A Note on Foreign Contractors

The W-9 only applies to U.S. persons. If the contractor is a foreign individual or entity, the right form is a W-8BEN or another form in the W-8 series, and the default withholding rate without that form is 30% of the gross payment rather than the 24% backup rate.9Internal Revenue Service. Tax Withholding Types If a contractor you assumed was domestic turns out to be a foreign person, switch to the W-8 process immediately. A completed W-8BEN stays valid for the calendar year it’s signed plus three additional years.