W-9 and W-8BEN basics: Tax documentation for contractor payments

When you pay contractors, you need tax documentation. For U.S.-based contractors, that's a W-9. For international contractors, it's typically a W-8BEN. These forms tell you (and the IRS) who you're paying and whether you need to withhold taxes or issue year-end tax forms.

This is a practical overview of when to collect each form, what information they contain, and how to store them properly. Disclaimer: This is not legal or tax advice. Use this to inform conversations with your accountant or tax advisor.

W-9: Documentation for U.S. contractors

A W-9 (Request for Taxpayer Identification Number and Certification) is a form you collect from U.S.-based contractors before you pay them. It provides their legal name, business name if applicable, taxpayer identification number (TIN), and tax classification (individual, sole proprietor, LLC, corporation, etc.).

You need a W-9 from any U.S. contractor you pay $600 or more in a calendar year. The information on the W-9 is used to prepare Form 1099-NEC at year-end, which reports the total amount you paid to that contractor to the IRS. You file the 1099-NEC with the IRS and send a copy to the contractor.

The W-9 itself is not filed with the IRS—you keep it in your records. It's your documentation that you collected the contractor's TIN, verified their tax status, and can issue a 1099-NEC accurately.

W-8BEN: Documentation for foreign contractors

A W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) is a form you collect from non-U.S. contractors—specifically, foreign individuals. It certifies that the contractor is not a U.S. person and may be eligible for reduced or exempt withholding under a U.S. tax treaty.

Without a W-8BEN on file, you may be required to withhold 30% of payments to foreign contractors and remit it to the IRS as backup withholding. With a valid W-8BEN, the contractor certifies their foreign status, and you typically don't withhold (assuming the payment is for services performed outside the U.S.).

Like the W-9, you keep the W-8BEN in your records—you don't file it with the IRS. It's your documentation that the contractor is foreign and you're not required to withhold or issue a 1099.

W-9 vs W-8BEN: Quick comparison

W-9 is for U.S. contractors. Purpose: collect their taxpayer identification number for year-end 1099-NEC reporting. Year-end result: you issue a 1099-NEC if they were paid $600 or more.

W-8BEN is for foreign contractors (individuals). Purpose: certify their foreign status and avoid withholding requirements. Year-end result: typically no 1099 required because they're not a U.S. person.

The rule of thumb: if the contractor is based in the U.S., collect a W-9. If they're based outside the U.S., collect a W-8BEN. If you're unsure, ask the contractor directly where they're tax-resident.

When to collect these forms

Collect W-9 or W-8BEN forms before you make the first payment to a contractor. This ensures you have the documentation on file from the start and can issue accurate year-end tax forms if needed. Collecting forms upfront also avoids payment delays while you gather documentation.

Many businesses collect these forms during contractor onboarding, along with the service agreement and other documentation. This creates a complete record and avoids the common mistake of scrambling for tax forms in December.

If you're already working with a contractor and don't have their W-9 or W-8BEN on file, request it now. You'll need it for year-end reporting, and it's easier to collect mid-year than in December when everyone is busy and less responsive.

Information required on each form

W-9 requires: Legal name, business name (if different from legal name), tax classification (individual, sole proprietor, LLC, corporation, partnership, etc.), address, and taxpayer identification number (Social Security Number for individuals, Employer Identification Number for businesses).

W-8BEN requires: Legal name, country of citizenship, permanent residence address, date of birth, foreign tax identification number (if applicable), and whether the contractor claims a tax treaty benefit (if applicable).

Both forms require a signature and date. The signature certifies that the information is accurate and that the contractor is either not subject to backup withholding (W-9) or is a foreign person (W-8BEN).

Storing forms securely

You don't file W-9 or W-8BEN forms with the IRS—you keep them in your records. However, they contain sensitive information (taxpayer identification numbers, addresses, dates of birth), so store them securely.

W-9 retention: Keep W-9 forms for at least 4 years after the last 1099-NEC you issued to that contractor. This aligns with IRS record-keeping requirements for employment tax documents. After that period, you can destroy them securely.

W-8BEN retention: Keep W-8BEN forms for as long as you're paying the contractor, plus 3 years after the last payment. W-8BEN forms expire after 3 years from the signature date, so you may need to collect updated forms from long-term contractors.

Many businesses store these forms digitally in secure cloud storage or contractor management software. Digital storage makes forms easy to access for year-end reporting and ensures they're backed up. Use encryption and access controls to limit who can view sensitive tax documentation.

Common mistakes to avoid

Paying before collecting forms. If you pay a contractor without a W-9 or W-8BEN on file, you may be required to withhold backup withholding (24% for missing W-9) or foreign withholding (30% for missing W-8BEN). Always collect forms before the first payment.

Using the wrong form. Don't collect a W-9 from a foreign contractor or a W-8BEN from a U.S. contractor. The tax implications are different. Ask clearly where the contractor is tax-resident and use the appropriate form.

Not updating expired W-8BEN forms. W-8BEN forms expire after 3 years from the signature date. If you're still working with a contractor after 3 years, collect a new W-8BEN to keep your records current. Set a reminder for the expiration date.

Not storing forms securely. W-9 and W-8BEN forms contain sensitive information. Store them in a secure location with access controls—not in shared folders, public cloud storage, or email. A data breach could expose contractor information.

Losing forms. Keep organized records so you can find forms quickly at year-end. If you can't locate a W-9 when preparing 1099s, you'll need to contact the contractor to recollect it, causing delays.

Year-end reporting and compliance

At year-end, you use the information from W-9 forms to prepare 1099-NEC forms for U.S. contractors you paid $600 or more in the calendar year. You must file 1099-NEC forms with the IRS by January 31 and provide copies to contractors by January 31.

For foreign contractors with valid W-8BEN forms on file, you typically don't issue 1099 forms (assuming the services were performed outside the U.S.). The W-8BEN is your documentation that the contractor is foreign and not subject to U.S. 1099 reporting.

If you paid a foreign contractor for services performed in the U.S., or if you withheld taxes, you may need to file Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons) and Form 1042-S (Foreign Person's U.S. Source Income Subject to Withholding). Consult your accountant if you're unsure about reporting requirements.

If you failed to collect required forms and should have withheld but didn't, you're liable for the taxes and penalties. The cost of collecting forms upfront is far less than the cost of back taxes and penalties later.

Practical workflow for managing forms

Here's a straightforward process for collecting and managing W-9 and W-8BEN forms:

During onboarding: Ask new contractors where they're tax-resident. If U.S., send them a blank W-9 form. If foreign, send them a blank W-8BEN form. Request the completed form before the first payment. Provide clear instructions and a deadline.

Store securely: Save the completed form in a secure location—encrypted cloud storage, contractor management software with access controls, or a locked file cabinet. Ensure only authorized personnel (accounting, finance) can access the forms.

Track expiration dates: For W-8BEN forms, note the expiration date (3 years from signature date). Set a reminder to contact the contractor and collect a new form before it expires if you're still working together.

Year-end preparation: In January, review all W-9 forms on file. Prepare 1099-NEC forms for contractors you paid $600 or more in the previous calendar year. File 1099s with the IRS by January 31 and send copies to contractors.

Follow up: If contractors don't respond to form requests or requests for renewal, follow up promptly. For contractors you're still paying, this is time-sensitive.

The bottom line

W-9 and W-8BEN forms are basic tax documentation for contractor payments. Collect the right form (W-9 for U.S. contractors, W-8BEN for foreign contractors) before you make the first payment. Store forms securely and keep them for the required retention period.

This isn't complicated, but it's important. Having proper tax documentation protects you from withholding requirements, makes year-end reporting straightforward, and ensures you're compliant with IRS rules. Missing forms can trigger penalties and create audit risk.

Set up a simple process: collect forms during onboarding, store them securely, track expiration dates, and prepare year-end reports on schedule. The small effort upfront prevents much larger problems later.

If you're managing multiple contractors, organize your forms and tracking so nothing falls through the cracks. Use a spreadsheet or dedicated software to track who has provided forms and when forms expire. This makes year-end reporting much simpler.