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What if a contractor or vendor refuses to provide a W9 for a 1099?

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Taxation is a necessity for every business in the United States. As a business, you are mandated by the IRS to provide a 1099 form to contractors and vendors you pay more than $600 in a tax year. For the 1099 forms, you should collect W-9 forms from your contractors and vendors which contain the name and address of the vendors, tax ID numbers, and your company information. What shall you do, though, if a contractor or vendor insists on not completing and getting a form W-9? Here are some steps you can take if a vendor won't give you a W-9 for a 1099:

1. Reinforce the logic and make clear the purpose of each section. At this point state to the contractor or vendor that in accordance with the IRS legal terms you are expected to acquire their tax information and write out a 1099 form for the purpose of accurately reporting the payments made to them during the tax year over $600. Describe IRS regulations details if necessary.

2. Withhold payment. Express that as soon as they have filled out the W-9 and submitted it, the payment will be sent as it requires their tax ID to be legal. Chronic withholding helps these entities to comply with the contract.

3. Enforce financial penalties and termination of services. In this case, if a contractor or a vendor does not provide you a W-9 after you’ve explained why they need it and withheld payment from them, it would be wise to impose monetary penalties until they do or to even cease to use their services altogether. Specify repercussions and Service conditions in the first contractor/vendor agreement.

4. Find out other sources of information. Once you made payment exceeding the $600 threshold to a contractor or vendor without having asked for Form W-9 from them, you can try collecting their personal tax information from the previous invoices, check stubs, prior year 1099 forms or other proof documents they give you as proof that you don't have to be burdened collecting tax already. In addition to that, the IRS has a readily available online search tool of taxpayer information that may assist in completing the missing puzzle pieces.

5. Fill out the IRS form. After a failed attempt to get the contractor’s or vendor’s tax information if the situation doesn’t solve itself then you need to file the Form W-9S with the IRS. The non-filing part of these notifications serves as a reminder to the IRS about the non-compliant party, which is helpful for follow-up action and would free the IRS from penalties due to not filing 1099 information returns as required.

You should try to request W-9 forms early and explain to them that you need those forms completed to stay out of most noncompliance issues as a 1099 reporting business. However, if the contractor or vendor decides not to give you their Tax ID number, take the initiative to follow the rules and report payments made and ensure that you are not penalised by the IRS for any IRS penalties. Non-payments and reporting of inconsistency help the IRS force vendors’ compliance.