Why You Should Collect Form W-9 Before Paying a Contractor, Landlord or Vendor

One of the simplest ways to avoid 1099 problems is this: collect Form W-9 before making payment to any independent contractor or vendor that may require a 1099, and yes, even your landlord. Note an exception: If you pay rent to a property management company, a 1099 is not required, and thus a W-9 is not needed.

A completed W-9 gives you the vendor’s legal name, tax classification, and taxpayer identification number (TIN). Without it, you may not have what you need to properly prepare a Form 1099 at year-end.

Why this matters

If you make payment before obtaining a proper W-9, you take on unnecessary risk:

• You may be unable to file an accurate 1099.

• If the vendor does not provide a TIN, or provides an obviously incorrect one, you may be required to withhold 24% federal backup withholding from reportable payments.

• If backup withholding should have been taken and was not, the payer can be held liable for the amount that should have been withheld.

Best practice

The cleanest policy is straightforward: No W-9, no payment.  Getting the form up front is far easier than trying to chase down missing tax information later.

For your landlord, unless you pay rent to a property management company, make the W-9 requirement a stipulation in the lease, or at least be sure to get the W-9 as you sign the lease. If you didn’t do that, get the W-9 now before issuing another rent payment.

What happens if the IRS says the TIN does not match?

Even if you collected a W-9, problems can still arise later. After filing a 1099, the payee’s name and TIN might not match IRS records. Electronic services now get a timely report of mismatches that can be passed on to the payer, or the payer gets a notice directly from the IRS.

When that happens, the payer has a duty to act:

• Obtain a corrected Form W-9.

• Resubmit the 1099 with the corrected information

• If the issue is not timely resolved, begin 24% backup withholding on future reportable payments as required.

In plain English, collecting the W-9 is step one — but keeping an eye on IRS mismatch notices and responding properly is just as important.

Bottom line

Collecting a W-9 before payment is not just good admin work. It is basic protection for your business. It helps support accurate 1099 filing, reduces IRS notice issues, and limits exposure for backup withholding liability.

Scott C Turner, CPA     www.RecordsInOrder.com