It is a best practice to always collect Form W-9 from your vendors before making payments. This will ensure you have all the information you need from them when preparing your 1099s at the end of the year. Once you receive the W-9 back from the vendor/payee, if they have checked the C Corporation Box, the S Corporation Box or the Limited Liability Company Box with a “C” or “S” noted, you are not required to prepare a 1099 and send to them. For vendors/payees who have marked as their tax classification: Individual/sole proprietor, Partnership, Trust/ Estate or Limited liability company with a “P” marked or Other, then you are required to send a 1099 to them. The only exception is all payments to attorneys should be reported on a 1099-MISC as mentioned above. You should retain indefinitely the Form W-9 to support your filing or lack of filing a 1099. If you are unable to get the EIN of your vendor, the IRS requires you to withhold 25% from any payments you make to that company or person. This is referred to as backup withholding.
