When do I need to collect W-9 forms from subs?
The simple rule is to collect a W-9 before you pay a subcontractor for the first time. Ideally you get it at contract signing or when the sub shows up to start work. Treat it the same as proof of insurance or a signed scope of work. No W-9, no check.
The reason this matters is the 1099-NEC. If you pay any unincorporated subcontractor $600 or more during the calendar year, you’re required to file a 1099-NEC with the IRS by January 31 of the following year. The W-9 gives you the sub’s legal name, address, tax ID or Social Security number, and entity type. Without that information, you can’t file the 1099. And if you don’t file the 1099, you’re looking at IRS penalties that start at $60 per form and go up from there depending on how late you are.
The contractors who run into trouble are the ones who wait until January to start collecting W-9s. By then, subs have changed phone numbers, moved to different states, or just don’t feel like responding to your texts. You end up spending hours tracking people down for a form that takes two minutes to fill out. Some never respond at all, and now you’re stuck deciding whether to file without the correct TIN or skip it entirely. Neither option is good.
Make W-9 collection part of your onboarding process for every new sub. Keep a folder (digital or physical) organized by vendor name. You don’t need a new W-9 every year from the same sub unless their business information changes. Once you have a valid one on file, you’re set until they notify you of a change.
There’s another consequence most people don’t think about. If a sub refuses to provide a W-9 or gives you an incorrect TIN, the IRS can require you to withhold 24% of every payment as backup withholding. That’s money coming out of what you owe the sub, and it creates friction and paperwork nobody wants. Getting the W-9 upfront avoids this entirely.
If you’re already behind and have subs you’ve been paying without W-9s on file, start collecting them now. Don’t wait until December. The closer you get to the filing deadline, the harder it gets. A CPA who works with construction businesses can help you sort out what’s missing and get compliant before penalties stack up.
For ongoing tracking of sub payments and 1099 preparation, having full-service bookkeeping in place makes this much easier. When every payment is categorized and tied to the right vendor throughout the year, January becomes a quick review instead of a scramble. The W-9 is just a form, but collecting it at the right time saves real money and real stress down the road.
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