Businesses generally must report payments made in the course of business to unincorporated service providers above the IRS threshold — independent contractors, freelancers, landlords, attorneys (with special rules), and similar payees. Payments processed through third-party card and payment platforms follow separate reporting channels, which is why payment method matters to your obligations.
Before the form comes the harder question — is this worker genuinely a contractor, or an employee in substance? The tests weigh behavioral control, financial control, and the nature of the relationship. Misclassification is a persistent enforcement priority with exposure to back payroll taxes and penalties, and the contract's label carries little weight against the working reality.
Collect a completed W-9 from every new vendor before their first payment — onboarding, not year-end, is when you have leverage. Track payments by vendor in your accounting system all year. In January, the filing becomes a report you run rather than a reconstruction you attempt. Businesses that chase W-9s in January from vendors they've already paid learn how quickly cooperation evaporates.
Late, incorrect, and unfiled information returns each carry per-form penalties that increase the longer the failure persists, and intentional disregard is penalized far more heavily — with no maximum. For a business with dozens of contractors, casualness compounds into real money.
No W-9, no payment. Adopted once, enforced always, it removes the entire January problem.
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