Backup withholding: what a missing W-9 costs
24% backup withholding on a vendor with no TIN: the rule, the journal entry, Form 945 and the 1099 that follows.
A payee who does not give a correct TIN is subject to backup withholding. The payer keeps back 24% of each reportable payment and sends it to the IRS. That is not a penalty on the vendor: it is the payer's obligation, and a payer who should have withheld and didn't can be assessed the tax itself.
Photographer's invoice, approved
| Account | Debit | Credit |
|---|---|---|
| Expense — photography | 5,000.00 | |
| 2000Accounts payable | 5,000.00 | |
| Balanced | 5,000.00 | 5,000.00 |
The bill, at the full invoice.
Paid less 24% backup withholding: no TIN on file
| Account | Debit | Credit |
|---|---|---|
| 2000Accounts payable | 5,000.00 | |
| 1000Cash | 3,800.00 | |
| Backup withholding payable | 1,200.00 | |
| Balanced | 5,000.00 | 5,000.00 |
Paying it. The withheld tax is a liability of its own, owed to the IRS, and not payroll.
Backup withholding is deposited with the company's other federal tax deposits and reported once a year on Form 945, the return for federal income tax withheld from nonpayroll payments. Never on Form 941, which is for payroll. The vendor then gets a 1099 showing both the payment and the tax withheld, whatever the amount.
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Anything marked as a convention is ours, not the rule-maker's.
- IRS guidance
- IRC §3406; IRS — Backup withholding (opens in a new tab)Backup withholdingFree to read
- IRS — About Form 945; Instructions for Form 945 (2025), When To File (opens in a new tab)Form 945, Annual Return of Withheld Federal Income TaxFree to read
- Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026), Form 1099-NEC, box 1a (opens in a new tab)The 1099-NEC threshold for 2026 paymentsFree to read
- Official form
- Form W-9 (Rev. March 2024), What is backup withholding? (opens in a new tab)Form W-9, Request for Taxpayer Identification Number and CertificationPDF · Free to read
The words this page teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- Backup withholdingFederal income tax a payer must withhold at 24% from reportable payments — contractor fees, interest, dividends, card settlements — when the payee has not given a correct TIN or the IRS has notified the payer to withhold. Deposited and reported on Form 945
- Form W-9The IRS form a US payee gives a payer to certify its name, tax classification and taxpayer identification number — collected before the first payment, because it drives 1099 reporting and backup withholding
- PayeeThe party receiving a paymentConvention
- LiabilityA present obligation of the entity to transfer an economic benefit (FASB CON 8 ¶E37)
See also
- W-9s and backup withholding: a vendor onboarding guideWhen to ask for a W-9, how IRS TIN matching works, and what happens when a vendor won’t give you one: 24% backup withholding, owed by you.
- Form 1099-NECThe IRS form that reports what you paid a US contractor for services. For payments made in 2026, you file one for each contractor paid $2,000 or more in the year (the IRS can adjust that for inflation from 2027); for 2025 payments the threshold was $600. Payments to corporations (other than for legal services), and payments made by card or through a payment processor, generally don't need one.