Contractor tax forms, at a glance: What to collect and why it matters

Disclaimer: This is informational content, not tax or legal advice. Consult a qualified tax advisor or attorney for guidance specific to your situation. Tax rules vary by jurisdiction and change frequently.

When you pay contractors, you need to collect tax forms to establish their status and handle reporting correctly. This guide covers which forms to collect, when, and how to store them.

U.S. tax form basics

If you're a U.S. company paying contractors, you typically need to collect tax forms to report payments to the IRS.

The $600 threshold: You must file a 1099-NEC form (reporting contractor payments) for U.S. contractors paid $600 or more in a calendar year. Below $600, no 1099 is required, but collecting forms is still good practice.

Before the first payment: Always collect tax forms before making the first payment. This ensures you have the information on file and prevents payment delays while gathering documentation.

Which forms to collect

Each form serves a specific purpose. Collecting the right form prevents withholding mistakes and ensures compliant reporting.

W-9 (Request for Taxpayer Identification Number and Certification) is for U.S. contractors. It provides their tax identification number (Social Security Number or Employer Identification Number) and certifies they're not subject to backup withholding. You use this information to file 1099-NEC forms at year-end. Collect W-9 from all U.S. contractors before the first payment.

W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) is for non-U.S. individuals (freelancers, sole proprietors) who are not U.S. persons. It certifies their foreign status and may claim treaty benefits that reduce or eliminate withholding. Collect W-8BEN from all non-U.S. individual contractors before the first payment.

W-8BEN-E (Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting for Entities) is for non-U.S. entities (companies, LLCs, partnerships). Use this instead of W-8BEN if the contractor is a business entity rather than an individual. Collect W-8BEN-E from non-U.S. entities before the first payment.

1099-NEC (Miscellaneous Income) is the form you prepare and file with the IRS at year-end. It reports total payments to each U.S. contractor paid $600+ during the year. You file with the IRS by January 31 and send a copy to each contractor.

Storage and management

Tax forms contain sensitive information. Store them securely and keep them for the required retention period.

Collect before first payment. Don't pay a contractor until you have their tax form on file. This ensures documentation is complete from the start.

Store securely. Use encrypted cloud storage, a secure document management system, or a locked filing cabinet. Don't leave tax forms in open folders or unsecured email. Limit access to finance and compliance team members only.

Keep for at least 4 years. The IRS has a standard 3-year audit window, but they can look back up to 4 years if they suspect issues. Store all forms for 4 years after filing the corresponding 1099-NEC.

W-8BEN forms expire. W-8BEN forms are valid for 3 years from the date signed. Set calendar reminders to request updated forms before expiration. When a W-8BEN expires, you may be required to withhold 30% from future payments unless an updated form is on file.

Renewal workflow for W-8BEN forms

Since W-8BEN forms expire, establish a simple renewal process:

30 days before expiration: Set a calendar reminder. Email the contractor with a blank W-8BEN form and clear instructions.

Request updated form: "Your W-8BEN form expires on [date]. Please complete and return the attached form so we can continue processing payments without interruption."

Receive and verify: When the contractor returns the updated form, verify the information is accurate and the form is signed and dated.

Store new form: File the new W-8BEN in your document management system and archive the old one.

Update your records: Record the new expiration date in your contractor tracking system so you know when the next renewal is due.

When to collect which form

For U.S. contractors: Collect W-9. Use it to file 1099-NEC forms at year-end if they were paid $600+.

For non-U.S. individual contractors: Collect W-8BEN. This certifies their foreign status and prevents 30% backup withholding. Renew every 3 years.

For non-U.S. entity contractors: Collect W-8BEN-E. This is for companies, not individuals. Renew every 3 years.

For any contractor: Before making the first payment. Don't wait until year-end to collect forms.

Year-end reporting

At year-end, use the information from W-9 forms to file 1099-NEC forms:

For each U.S. contractor paid $600+: Prepare a 1099-NEC form showing total payments for the year.

File by January 31: Submit 1099-NEC forms to the IRS by January 31 of the following year. Send a copy to each contractor.

Keep records: Your W-9 forms and payment records are the documentation supporting the 1099-NEC amounts.

For non-U.S. contractors: You typically don't file 1099-NEC forms. The W-8BEN on file documents their foreign status and why no 1099 was issued.

Frequently asked questions

What if a contractor refuses to provide a W-9 or W-8BEN?

You may be required to withhold backup withholding (24% for U.S. contractors) or 30% withholding for non-U.S. contractors without a valid W-8BEN. Consult your tax advisor before making payments without proper forms. Most contractors understand the need for tax documentation and will provide forms readily.

Do I need to collect forms from contractors paid less than $600?

It's not required for 1099-NEC reporting purposes, but it's good practice. Collect forms from all contractors at onboarding. This way, if payments eventually exceed $600, you already have the documentation. It also prevents payment delays later when you need to gather forms.

What's the difference between W-8BEN and W-8BEN-E?

W-8BEN is for individuals (sole proprietors, freelancers, independent contractors working as themselves). W-8BEN-E is for entities (companies, LLCs, partnerships, incorporated businesses). Use the form that matches the contractor's legal structure. If you're unsure, ask: "Are you a sole proprietor or do you operate through a business entity?"

Can I use electronic signatures for tax forms?

Yes, the IRS accepts electronic signatures on W-9 and W-8BEN forms, provided you follow IRS guidelines for electronic signature systems. Most reputable document management platforms (DocuSign, HelloSign, etc.) support compliant e-signatures.

What if a contractor's information changes mid-year?

Request an updated form immediately. Common changes: a contractor moves from the U.S. to another country (need new W-8BEN instead of W-9), a contractor changes business structure (need W-8BEN-E instead of W-8BEN), or a contractor's legal name changes. Use the updated information for future payments and year-end 1099 reporting.

What if I can't locate a contractor to get their signature on a W-9?

You're still required to attempt to collect the form before payment. Document your attempt (email showing you requested the form). If the contractor doesn't respond and you must pay, consult your tax advisor about backup withholding obligations.

Can I accept a W-9 signed electronically?

Yes. Electronic signatures are acceptable as long as they meet IRS standards. Email, DocuSign, or platform signatures are fine.

Important disclaimers

Tax rules vary by jurisdiction. This guide covers U.S. federal requirements. Your state or local jurisdiction may have additional requirements. Consult your tax advisor about state-level obligations.

Rules change frequently. The IRS updates thresholds, forms, and requirements. Verify current requirements on the IRS website or with your tax advisor.

International complexity. If you're paying contractors in multiple countries, tax withholding, treaty benefits, and local reporting obligations become more complex. International payments may trigger different rules. Consult a tax advisor experienced in cross-border payments.

This is not tax advice. Consult a qualified tax advisor or CPA for guidance specific to your situation. Tax compliance depends on your specific facts and circumstances.

The bottom line

Collect tax forms from all contractors before the first payment. W-9 for U.S. contractors, W-8BEN for non-U.S. individuals, W-8BEN-E for non-U.S. entities. Store forms securely for at least 4 years. Renew W-8BEN forms every 3 years.

At year-end, use the information from W-9 forms to file 1099-NEC forms for contractors paid $600+. This simple system ensures compliance and creates a clear audit trail.

When in doubt, consult your tax advisor. The cost of professional guidance is far less than the cost of tax compliance mistakes.