# Vendor onboarding: W-9, W-8BEN and TIN matching

> What to collect before a vendor's first payment, how TIN Matching works, and what 24% backup withholding looks like in the books.

Source: https://lopifi.com/learn/vendor-onboarding-w-9-and-tin-matching
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**What do I need from a new vendor before paying them: W-9, W-8BEN, TIN matching?** What to collect before a vendor's first payment, how TIN Matching works, and what 24% backup withholding looks like in the books.

Every vendor is set up once, before the first payment, in the [vendor master](https://lopifi.com/md/glossary/vendor-master): legal name, tax classification, taxpayer identification number, bank details, terms, and who approved the setup. The tax part comes from one IRS form for a US vendor and another for a foreign one, and collecting it at onboarding is what makes year-end 1099s a report rather than a chase.

1. **Collect the tax form.** A [Form W-9](https://lopifi.com/md/glossary/form-w-9) from a US person (an individual, LLC, partnership or corporation). A foreign individual signs a [Form W-8BEN](https://lopifi.com/md/glossary/form-w-8ben); a foreign entity, a W-8BEN-E.
2. **Match the TIN.** Run the name and TIN through IRS [TIN Matching](https://lopifi.com/md/glossary/tin-matching) for anyone who may get a 1099. A mismatch found now is a phone call; found in January, it is a late form.
3. **Record the classification.** Line 3a of the W-9 says whether the vendor is an individual, a partnership, an LLC or a corporation. That box decides whether a 1099 is needed at all.
4. **Take bank details, then verify them.** Bank details come from the vendor on a signed form or through the bill-pay tool, and are confirmed by calling a number you already had. Never from an email alone.
5. **Approve the vendor.** Someone other than the person who will pay the vendor approves the setup. That is [segregation of duties](https://lopifi.com/md/glossary/segregation-of-duties) at its smallest.

Onboarding a vendor at Northwind.

| Vendor | Form | Why it matters |
| --- | --- | --- |
| US individual, LLC, partnership or corporation | Form W-9 | Certifies the TIN and classification; drives 1099s and backup withholding |
| Foreign individual | Form W-8BEN | Establishes foreign status; a W-9 is not used |
| Foreign entity | Form W-8BEN-E | The entity version of the same certificate |

Which form, from whom.

> “Instead, use the appropriate Form W-8 or Form 8233 (see Pub. 515).”

— [Form W-9 (Rev. March 2024), Foreign person](https://www.irs.gov/pub/irs-pdf/fw9.pdf) (PDF), A foreign person does not give a W-9

> “For use by individuals. Entities must use Form W-8BEN-E.”

— [Form W-8BEN (Rev. October 2021)](https://www.irs.gov/pub/irs-pdf/fw8ben.pdf) (PDF), Form W-8BEN, Certificate of Foreign Status of Beneficial Owner (Individuals)

A vendor who never gives a correct TIN is subject to [backup withholding](https://lopifi.com/md/glossary/backup-withholding): the payer keeps back 24% of each reportable payment for the IRS. The sub-page on backup withholding works one through Northwind's books.

## TIN Matching

The IRS runs a free check of name and TIN pairs for payers who file information returns. It answers one question, whether the pair matches IRS records, and says nothing about what the right number is. Run it at onboarding, and again when a vendor's name or entity type changes.

> “The TIN Matching service lets you validate TIN and name combinations before submitting an information return.”

— [IRS — Taxpayer Identification Number (TIN) Matching](https://www.irs.gov/tax-professionals/taxpayer-identification-number-tin-matching), TIN Matching

> **A W-9 is not a classification decision.** A W-9 records how a payee is taxed. Whether a person is your contractor or your employee is [worker classification](https://lopifi.com/md/glossary/worker-classification), and it turns on how the work is done, not on which form they signed. Getting it wrong makes the 1099 the wrong form altogether.

**At onboarding, as a condition of payment**
- Pro: The vendor still wants to be paid, so the form comes back
- Pro: TIN Matching runs before any 1099 is filed
- Pro: Backup withholding never has to start
- Con: One more step before a vendor can be paid
- Best for: Every vendor who might receive a reportable payment

**In January, before 1099s**
- Pro: Nothing up front
- Con: The vendor has been paid, so your request is last on their list
- Con: A missing TIN means the payments should already have been backup-withheld
- Con: The 1099 deadline does not move
- Best for: No one

When to collect the W-9.

In this lesson: **backup withholding**, worked through the books; and **foreign vendors**, with the W-8BEN and when it lapses.

## Pages in this lesson

- [Backup withholding: what a missing W-9 costs](https://lopifi.com/md/learn/vendor-onboarding-w-9-and-tin-matching/backup-withholding) — 6 min. What is backup withholding, and what happens if a vendor won't give me a W-9?
- [Foreign vendors and the W-8BEN](https://lopifi.com/md/learn/vendor-onboarding-w-9-and-tin-matching/foreign-vendors-w-8ben) — 4 min. What tax form do I need from a foreign contractor, and do they get a 1099?

## Where this lesson's rules come from

- [Form W-9 (Rev. March 2024), What is backup withholding?](https://www.irs.gov/pub/irs-pdf/fw9.pdf) (PDF) — Form W-9, Request for Taxpayer Identification Number and Certification (form)
- [Form W-9 (Rev. March 2024), Foreign person](https://www.irs.gov/pub/irs-pdf/fw9.pdf) (PDF) — A foreign person does not give a W-9 (form)
- [Form W-8BEN (Rev. October 2021)](https://www.irs.gov/pub/irs-pdf/fw8ben.pdf) (PDF) — Form W-8BEN, Certificate of Foreign Status of Beneficial Owner (Individuals) (form)
- [IRC §3406; IRS — Backup withholding](https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding) — Backup withholding (irs)
- [IRS — Taxpayer Identification Number (TIN) Matching](https://www.irs.gov/tax-professionals/taxpayer-identification-number-tin-matching) — TIN Matching (irs)

## Read further

- https://lopifi.com/md/startups/collecting-w9s-and-backup-withholding
- https://lopifi.com/md/startups/contractor-vs-employee
- https://lopifi.com/md/accounting/1099-nec
- https://lopifi.com/md/accounting/worker-classification
- https://lopifi.com/md/tools/identifiers
- https://lopifi.com/md/docs/domain/06-procure-to-pay

- **Track:** [Accounts payable](https://lopifi.com/md/learn/ap)
- **Lesson:** Lesson 2 of 8 — 6 min
- **Terms taught:** [Vendor master](https://lopifi.com/md/glossary/vendor-master), [Form W-9](https://lopifi.com/md/glossary/form-w-9), [Form W-8BEN](https://lopifi.com/md/glossary/form-w-8ben), [TIN matching](https://lopifi.com/md/glossary/tin-matching), [Backup withholding](https://lopifi.com/md/glossary/backup-withholding), [Payee](https://lopifi.com/md/glossary/payee), [Vendor](https://lopifi.com/md/glossary/vendor)
- **Previous:** [What accounts payable is: procure to pay, AP · Lesson 1](https://lopifi.com/md/learn/what-is-accounts-payable)
- **Next:** [Backup withholding: what a missing W-9 costs](https://lopifi.com/md/learn/vendor-onboarding-w-9-and-tin-matching/backup-withholding)
- **The course:** https://lopifi.com/md/learn