# 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.

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

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**What is backup withholding, and what happens if a vendor won't give me a W-9?** 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](https://lopifi.com/md/glossary/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.

> “Persons making certain payments to you must under certain conditions withhold and pay to the IRS 24% of such payments.”

— [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

*[Figure: w9 tin match]*

No TIN on file: of a $5,000 invoice, $1,200 goes to the IRS.

**Northwind — An invoice with no W-9.** Say a freelance photographer invoices Northwind $5,000 and has not returned a W-9. Northwind books the bill at the full $5,000, pays the photographer $3,800, and owes $1,200 to the IRS until it is deposited. The expense is the whole invoice: withholding changes who receives the cash, not what the service cost.

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.

> “Use this form to report withheld federal income tax from nonpayroll payments.”

— [IRS — About Form 945; Instructions for Form 945 (2025), When To File](https://www.irs.gov/forms-pubs/about-form-945), Form 945, Annual Return of Withheld Federal Income Tax

## Where this page'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)
- [IRC §3406; IRS — Backup withholding](https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding) — Backup withholding (irs)
- [IRS — About Form 945; Instructions for Form 945 (2025), When To File](https://www.irs.gov/forms-pubs/about-form-945) — Form 945, Annual Return of Withheld Federal Income Tax (irs)
- [Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026), Form 1099-NEC, box 1a](https://www.irs.gov/instructions/i1099mec) — The 1099-NEC threshold for 2026 payments (irs)

## Read further

- https://lopifi.com/md/startups/collecting-w9s-and-backup-withholding
- https://lopifi.com/md/accounting/1099-nec

- **Track:** [Accounts payable](https://lopifi.com/md/learn/ap)
- **Part of:** [Vendor onboarding: W-9, W-8BEN and TIN matching](https://lopifi.com/md/learn/vendor-onboarding-w-9-and-tin-matching) — 6 min
- **Terms taught:** [Backup withholding](https://lopifi.com/md/glossary/backup-withholding), [Form W-9](https://lopifi.com/md/glossary/form-w-9), [Payee](https://lopifi.com/md/glossary/payee), [Liability](https://lopifi.com/md/glossary/liability)
- **Previous:** [Vendor onboarding: W-9, W-8BEN and TIN matching](https://lopifi.com/md/learn/vendor-onboarding-w-9-and-tin-matching)
- **Next:** [Foreign vendors and the W-8BEN](https://lopifi.com/md/learn/vendor-onboarding-w-9-and-tin-matching/foreign-vendors-w-8ben)
- **The course:** https://lopifi.com/md/learn