Yes, you generally need to collect a Form W-9 from a consultant (independent contractor) if you pay them $600 or more in a calendar year for services rendered to your business. It is best practice to have the consultant complete the W-9 before you make any payments to ensure you have the necessary information for potential tax reporting.
Yes. If you pay someone for services and they're not your employee, you should have a Form W-9 on file, even if you're unsure whether those payments will exceed the reporting threshold. For 2025, businesses must issue a Form 1099 when total payments to a vendor reach $600 or more in a calendar year.
You're generally exempt from a W-9 if you're a U.S. employee (use Form W-4 instead), a tax-exempt organization (like 501(c)(3)), the U.S. government, a state, or certain foreign entities, but most independent contractors, freelancers, and other U.S. persons receiving reportable payments do need to provide a W-9 to avoid backup withholding. Corporations are exempt from some payments but not attorney fees or payments for medical services, and specific codes in the W-9 instructions identify different exempt entities.
If you're providing services as a freelancer and expect to earn $600 or more from a single client during the calendar year, you'll likely need to submit this form. Foreign contractors should not submit a W-9.
A W-9 is required when a U.S. person or entity receives (or expects to receive) $600 or more in a calendar year from a business for services as an independent contractor, freelancer, or other self-employed individual, or for certain other payments like interest, dividends, or real estate transactions, so the payer can report income to the IRS on a 1099 form. It's collected before payments reach that threshold to establish the payee's Taxpayer Identification Number (TIN) for year-end tax reporting.
You're generally exempt from a W-9 if you're a U.S. employee (use Form W-4 instead), a tax-exempt organization (like 501(c)(3)), the U.S. government, a state, or certain foreign entities, but most independent contractors, freelancers, and other U.S. persons receiving reportable payments do need to provide a W-9 to avoid backup withholding. Corporations are exempt from some payments but not attorney fees or payments for medical services, and specific codes in the W-9 instructions identify different exempt entities.
If they are now refusing to provide a W-9 you should stop paying them immediately and document your requests to obtain the W-9 in writing. Failing to report contractor payments could cost you $1,060 in penalties – per contractor.
Step 2: Apply Backup Withholding
If the contractor doesn't provide their W-9, the IRS requires you to withhold 24% of their payment. This is called backup withholding.
If you're self-employed as an independent contractor or freelancer, you've likely needed to complete Form W-9, which is different from Form W-4 that employees fill out. If you've earned interest from a bank or dividends from a mutual fund, you've probably also encountered the W-9 form.
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Who needs to fill out a W-9 form? Employers who work with independent contractors must provide them with a W-9 form to fill out before starting work. There are specific criteria for who is classified as an “independent contractor” and will need to fill it out.
You will usually submit a W-9 form when you engage with a company where reporting information to the IRS might be necessary, such as receiving payments for services you provide as an independent contractor, paying interest on your mortgage or even contributing money to your IRA account.
Consulting or freelancing as an independent contractor has benefits and drawbacks. Freelancers and consultants are known as "independent contractors" in legal terms. An independent contractor (IC) is a person who contracts to perform services for others without having the legal status of an employee.
A W9 from vendors is not required when payments will be less than $600 in a calendar year, but it is a good idea to request a W9 from all vendors. Also a W9 is not required when payments are not associated with conducting a trade or business.
Answer: Independent contractors generally report their income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Also file Schedule SE (Form 1040), Self-Employment Tax if your net earnings from self-employment are $400 or more.
Without a completed W-9 on hand for each contractor, you won't have the information you need to file their Form 1099 when doing your taxes at the end of the year.
Failure to Provide W-9 – If a vendor or contractor refuses to provide a W-9 when its requested the Payee is subject to a penalty of $50 for each such failure.
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Accordingly, a business who pays a person (including other businesses) more than $600 per year should have the payee fill out and sign Form W-9 at the time that the independent contractor, vendor, or other relationship commences, and prior to paying any sums to the person.
How does a freelancer fill out a Form W-9?
Yes, an LLC must provide a W-9 when requested by a business or financial institution for tax reporting purposes, particularly when receiving more than $600 in payments.