Why You Should Always Collect a W-9 Before Paying a Contractor

A simple business habit that saves you from end-of-year chaos.

Most businesses don’t think about contractor paperwork until tax season rolls around and suddenly everyone’s scrambling like it’s the final round of The Amazing Race: 1099 Edition. And every year, we see the same pattern: great businesses, smart owners, and absolutely zero W-9s on file for half the people they paid.

As a bookkeeping firm, we can confidently say this is one of the easiest problems to fix—and one of the biggest stress-reducers you can build into your operations.

Collecting a W-9 before you pay a contractor their first dollar is one of those deceptively simple steps that completely changes how smooth your financial processes feel at year-end. Let’s break down why this tiny habit matters so much.

What a W-9 Actually Does (Besides Ruining People’s Day If You Ask Too Late)

A W-9 gives you the contractor’s legal name, tax classification, and taxpayer identification number (TIN). In plain English: it tells you exactly who you paid and how the IRS expects you to report it.

When you have this upfront:

  • Your records match IRS expectations.

  • Your 1099 filing in January is accurate.

  • Your accountant isn’t hunting you down for missing info like a bounty hunter.

  • You don’t waste time guessing whether someone is an LLC, a sole prop, or a “half-set-up-business-I-swear-I’m-working-on-it.”

  • You avoid needing to issue backup withholding because you didn’t get their TIN.

That last one is a big deal. If you pay a contractor without a W-9 and they later ghost you, you’re still responsible for sending a 1099 — and you may be stuck doing backup withholding you didn’t know was required.

In short: the W-9 isn’t busywork. It’s the foundation for everything else that happens at tax time.

Why Before Payment Matters (Spoiler: People Respond Faster Before They’ve Been Paid)

Contractors are motivated when they’re onboarding with you. They have every reason to get their paperwork done correctly so invoicing and payment can begin. This is the sweet spot.

But ask for a W-9 eight months later?

You’re suddenly one of 67 notifications on their phone, and getting that form back becomes a game of digital hide-and-seek. And if they’ve moved, changed emails, or shut down their business? Good luck.

Collecting it before payment does three things:

  1. It sets the tone that your business runs efficiently.

  2. It prevents December chaos when you need 1099s prepared.

  3. It protects you if the contractor disappears or rebrands later.

Future you will be singing your praises.

How This Simple Habit Makes Year-End 10x Easier

January is 1099 season. And if you're doing things the right way, it’s also month-end, quarter-end, and year-end in one big blender.

When W-9s are collected on day one:

  • Your 1099s can be generated quickly and accurately.

  • Your CPA or bookkeeper doesn’t need to chase down missing details.

  • There are no delays, no hold-ups, and no “I hope this is the right address.”

  • You avoid late filing penalties because everything was ready.

Your bookkeeper will thank you. Your CPA will thank you. Honestly, the IRS would thank you too… if they were into gratitude.

How to Build This Into Your Contractor Onboarding

Here’s the easiest operational win you’ll have this quarter:

Make the W-9 part of the onboarding checklist.

Not optional. Not “I’ll get to it later.” Right there with the contract and the W-4 or ACH info if you’re paying via direct deposit.

A simple workflow:

  1. Contractor provides W-9.

  2. You store it securely (Google Drive, SharePoint, Keeper, etc.).

  3. Then you approve their first invoice or issue the first payment.

This takes maybe 2–3 minutes per contractor. But the payoff at year end is enormous.

The Bottom Line

If you want cleaner books, smoother tax filings, fewer surprises, and no chaotic “W-9 scavenger hunts” at year-end, the solution is ridiculously simple:

Collect the W-9 before you pay the contractor. Every time. No exceptions.

It’s a small step that saves hours of stress later—and your bookkeeper (hi 👋) will love you for it.

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