W-9 vs. 1099: What Small Business Owners Need to Know
W-9 vs. 1099 at a glance
The W-9 collects information. The 1099 reports it. Both forms belong to the same process, just at opposite ends.
Form W-9 |
Form 1099-NEC |
|
|---|---|---|
Filled out by |
The contractor |
Your business |
What it does |
Gives you their name, tax status and TIN |
Reports what you paid them |
Goes to the IRS? |
No, you keep it |
Yes, plus a copy to the contractor |
When |
Before the first payment |
By January 31 of the following year |
Without a valid W-9, you cannot file a correct 1099.
Form W-9: get it before you pay
Ask every new contractor for a W-9 before the first payment. It is a one-page IRS form (current revision: March 2024) that asks for:
legal name and business name, if different
tax classification: sole proprietor, corporation, partnership or LLC
address
taxpayer identification number (TIN): an SSN or an EIN
a signature confirming the TIN is correct
Do not send the W-9 to the IRS
- Keep it in your own records.
- Store it securely, because it contains an SSN or EIN.
The classification box matters: it tells you whether a 1099 will be needed at all.
Form 1099-NEC: report what you paid
Form 1099-NEC (Nonemployee Compensation) reports payments to independent contractors. It only applies to people who are genuinely not your employees; our guide to 1099 and W-2 tax forms for contractors and employees explains how the IRS draws that line.
You file it when all four apply:
the payee is not your employee
you paid for services in your business
the payee is an individual, partnership or estate
you paid $2,000 or more in the calendar year
Key 1099 figures for 2026 payments
- $2,000 threshold (previously $600)
- Adjusted for inflation from 2027
- Deadline: February 1, 2027 (January 31 is a Sunday)
- 10+ returns in total: e-filing required
Do not confuse it with:
Form 1099-MISC, which covers rent, prizes and other non-service payments. The IRS copy is due February 28 on paper or March 31 online.
Form 1099-K, which is issued by card processors and payment platforms, not by you.
Who gets a 1099-NEC and who does not
Payee or payment |
1099-NEC? |
|---|---|
Sole proprietor or freelancer, $2,000+ |
✅ Yes |
Partnership or LLC taxed as one, $2,000+ |
✅ Yes |
Attorney or law firm, $2,000+ (even a corporation) |
✅ Yes |
Corporation or LLC taxed as a C or S corp |
❌ No |
Payment by credit card or payment app |
❌ No (reported on 1099-K) |
Goods, freight, storage |
❌ No |
Employee wages |
❌ No (W-2) |
Foreign contractor working abroad |
❌ Generally no (W-8BEN instead of W-9) |
Medical and health care payments to corporations are also reportable, but on Form 1099-MISC.
One agency, three vendors
- Copywriter, sole proprietor, $2,400 by bank transfer → 1099-NEC
- Web developer, $3,500 by credit card → no 1099-NEC
- Consulting firm taxed as an S corp, $6,000 → no 1099-NEC
Backup withholding: what a missing W-9 costs
No TIN, or a TIN that does not match, means you must withhold 24% of each reportable payment and send it to the IRS instead of the contractor.
The $2,000 threshold applies here too.
Once you withhold, you must file a 1099-NEC regardless of the amount.
The contractor can claim the withheld tax on their own return.
Step by step: from onboarding to January
Onboarding: request the W-9 before paying, even for small jobs. Several small invoices can cross $2,000 by December.
Check: compare the name with the TIN. The IRS offers a TIN Matching program for payers.
During the year: track payments per contractor and note how each was paid.
December: chase any missing W-9s.
January: total each contractor's payments, remove card and app payments, and exclude corporations, except for legal fees.
Filing: e-file through IRIS, the IRS's online portal, or through tax software, and send Copy B to each contractor.
Afterwards: keep the W-9s and copies of the filed forms.
Request a new W-9 when something changes
- name
- entity type
- TIN
- an IRS notice about a mismatch
What the 1099 means for the contractor
A 1099-NEC is a record of income, not a tax bill. Nothing is withheld, so the contractor pays income tax plus self-employment tax on net profit; our overview of how self-employment tax is calculated and paid shows the math. Income is taxable whether or not a 1099 arrives. That includes payments under $2,000, which still go on Schedule C, as our guide on how to file taxes as a freelancer with Form 1040 and Schedule C explains.
FAQ:
Do I need a new W-9 every year?
No. Request a new one only when the contractor's name, tax classification or TIN changes, or when the IRS reports a mismatch.
Can a contractor refuse to fill out a W-9?
Yes, but you must then withhold 24% from reportable payments and send it to the IRS.
Do I send a 1099-NEC to an LLC?
It depends on how the LLC is taxed. Single-member LLCs and LLCs taxed as partnerships generally get one. LLCs taxed as corporations generally do not, unless they provide legal services.
I paid a contractor $1,500 in 2026. Do I file a 1099-NEC?
No, unless you applied backup withholding. The contractor still reports the income.
What is the difference between a W-9 and a W-4?
Employees fill out a W-4 so you can withhold tax from their wages. Contractors fill out a W-9 so you can report what you paid them.
What if I miss the 1099 deadline?
The IRS charges a penalty per form, and it is lower the sooner you file. Submit late forms as quickly as possible.
