🧾 1099-NEC Without SSN/ITIN

📊 Contractor Compliance Decision Tree (For Your Tax Office)

🔹 STEP 1 — Did the business pay the worker $600 or more?

• ❌ NO → No 1099-NEC required
• ✅ YES → Go to Step 2

🔹 STEP 2 — Is the worker a U.S. Person or Foreign Person?

Ask the worker to complete one of the following BEFORE PAYMENT:

🇺🇸 IF THEY COMPLETE A W-9

➡️ TIN Provided?

• ✅ YES →
  ✔ Pay normally
  ✔ Issue Form 1099-NEC
• ❌ NO →
  🚨 Backup Withholding Required You must:
  • Withhold 24% from future payments
  • Send withholding to IRS
  • File Form 945
  • Still issue Form 1099-NEC

🌎 IF THEY COMPLETE A W-8BEN (Foreign Worker)

🚨 DO NOT issue a 1099-NEC

Instead:

✔ Withhold 30% (unless treaty applies)
✔ File:

• Form 1042
• Form 1042-S

❌ IF THEY REFUSE TO COMPLETE W-9

You must:

✔ Document request for W-9
✔ Begin 24% Backup Withholding
✔ Remit to IRS
✔ File:

• Form 1099-NEC
• Form 945

Keep proof of:

• Email
• Text
• Signed refusal
• Written request

This protects your client from Missing TIN penalties.

🛑 NEVER DO THIS:

🚫 Pay contractor
🚫 No W-9
🚫 No withholding
🚫 Still file 1099-NEC

➡️ This creates payer liability for the tax that should’ve been withheld.

🧠 Best Practice Policy for Your Clients

“No W-9 = No Payment”

This eliminates:

1042-S misfiling issues

Backup withholding headaches

1099 penalties

IRS notices