What You Need to Know About Form W-9 and IRS "B Notices"

When you pay someone for services, you generally must issue Form 1099 at year-end. This reports how much you paid, plus their name, address, and tax ID number (SSN or EIN).

Get Their Information Early

Ask for payee information in writing before the first payment. The IRS prefers Form W-9, but any signed document with all required details is acceptable.

When You Must Start Taking Out Taxes (Backup Withholding)

Withhold 24% from payments if either applies:

• The payee never provided a taxpayer identification number (TIN)

• The IRS notifies you that the name and TIN do not match (a "B Notice")

What to Do

If no TIN was provided: Start withholding 24% immediately from all payments. You may stop once you receive a signed, valid Form W-9 with correct information.

If you receive a B Notice: Give the payee 30 days to resolve the mismatch. If not corrected within 30 days, begin withholding 24% from future payments.

Note: The IRS generally does not require you to correct prior-year Forms 1099 after receiving updated information.

When You Need Professional Help

This overview covers the basics. Consult a CPA for help with:

• Depositing and reporting withheld amounts to the IRS

• Issuing Forms 1099 without a TIN

• Handling multiple IRS notices for the same payee

• Paying non-California residents and related state rules