Backup Withholding (24%) Explained: How Missing W-9s Trigger It (and How to Avoid It)

Introduction: the “quiet week” before January chaos

If you can’t answer this in 10 seconds…

“Which vendors are missing a W-9 right now?”

…you’re not “a bit behind.” You’re exposed.

Because in certain situations, the IRS can require you (the payer) to withhold 24% from future payments. That’s backup withholding and it’s one of the fastest ways to turn a normal vendor payment into a messy compliance problem.

This guide breaks down:

• what backup withholding actually is,
• what triggers it in the real world,
• what’s changing for 2026 that you should not misunderstand, and
• the simplest W-9 workflow to prevent the whole mess.

Not tax advice. This is operational guidance. For filing specific decisions, talk to your CPA.

What is backup withholding (and why do teams freak out about it)?

Backup withholding is when the payer must withhold tax at the current rate of 24% from certain reportable payments in specific cases (often tied to missing/incorrect taxpayer info).

The business reality:

• Vendors get angry (“Why is my payment short?”)
• AP gets stuck doing cleanup instead of closing books
• Finance leadership gets dragged into avoidable fire drills

What triggers backup withholding in real life?

Most of the time, it’s not because you “did something wrong on purpose.” It’s because your Name/TIN and W-9 process isn’t tight.

Common trigger patterns include:

• Missing TIN (or obviously invalid TIN format)
• Name/TIN mismatch on an information return compared to IRS records
• IRS-driven follow-up after you file and something doesn’t match

The CP2100 / CP2100A pathway (the one teams don’t plan for)

If you file information returns with missing/incorrect Name/TIN combinations, the IRS may send a CP2100 or CP2100A notice telling you to correct the issue and follow backup withholding procedures.

Two operational details that matter:

• These notices go out twice per year (per IRS): Sept/Oct and again in April of the following year.
• CP2100 is generally for 50+ problem returns; CP2100A for fewer than 50.

If your vendor data is scattered across inboxes and spreadsheets, responding to these becomes painful.

The “January nightmare” is caused by 3 predictable process failures

1) Paying first, collecting W-9 later

You’ve basically told yourself: “We’ll remember later.” You won’t especially at scale.

2) No single source of truth

Vendor data is split across:

• email threads
• spreadsheets
• accounting system(s)
• whoever last touched it

That’s how mismatches are born.

3) Storing W-9s as email attachments

“In someone’s inbox” is not storage. It’s future failure.

2026 update you need to know (and not misread)

1) Backup withholding rate is still 24%

As of the IRS’s 2026 Employer’s Tax Guide (Publication 15), the backup withholding rate remains 24%.

2) Big change starting calendar year 2026: $600 → $2,000 threshold (for certain reportable payments tied to backup withholding)

Publication 15 (2026) states that for reportable payments under IRC 6041(a) or 6041A(a) that are made in calendar year 2026 and subject to backup withholding, a new law raises the aggregate reportable payment threshold from $600 to $2,000, and it will be inflation-adjusted after 2026. IRS

Here’s what not to do:
Don’t treat this as permission to get lazy about W-9s.

Why?

• You still need correct vendor TIN data to avoid mismatches and notices.
• You still need clean records for operational control and year-end accuracy.
• Backup withholding problems often come from bad data, not just thresholds.

If anything, this makes clean intake more important, because teams will be tempted to “ignore small vendors,” and that’s how your data integrity collapses.

Upcoming change: a revised Form W-9 is coming (Jan 2026 revision date is in draft)

Right now, the currently published Form W-9 is Rev. March 2024.

But the IRS released a draft of a revised Form W-9 with a January 2026 revision date, largely reflecting:

• updates connected to digital asset broker reporting rules, and
• clarifications for sole proprietors and certain entity/TIN situations.

Practical takeaway:
If your company uses a “saved” W-9 PDF template, vendor onboarding packet, or an embedded form on a portal plan to review/update it when the final 2026 W-9 is released.

The simple prevention blueprint (this avoids 90% of problems)

Step 1: Collect the W-9 before the first payment

Form W-9 is used to provide the correct TIN to a requester who may need to file an information return.
So stop paying vendors when their tax identity is still “TBD.”

Step 2: Track W-9 status like a workflow, not a hope

You need statuses like:

• Submitted
• Pending
• Needs correction

If you can’t see this in one place, you’re flying blind.

Step 3: Store W-9 PDFs centrally with submission history

When someone asks “Do we have the W-9?” you should answer in seconds not start a scavenger hunt.

What to do if you receive a CP2100/CP2100A notice

Don’t improvise. Follow a repeatable playbook.

The IRS points requesters to Publication 1281 for “B” notice procedures and copies of the notices.
At a high level:

• Send the appropriate B-notice to the payee
• Request corrected information (often via Form W-9 in first-notice scenarios per Pub 1281 guidance)
• Begin/continue backup withholding if required until corrected info is received

Where GetW9 fits

GetW9 is designed to make W-9 collection a process:

• send one secure link
• see who submitted vs who hasn’t
• send reminders without manual chasing
• save completed W-9 PDFs with submission history

That’s it. It replaces inbox chaos with a workflow.

Conclusion: your year-end move

Backup withholding is usually the symptom. Broken vendor intake is the cause.

This week (before you log off), do one thing:
Identify vendors paid this year who don’t have a clean W-9 on file.

If you can’t do that quickly, your process isn’t “fine.” It’s just untested until January tests it.