Do You Need a W-9 to Pay Customer Referral Rewards?

The short answer: Usually not for small rewards. For tax years beginning after 2025, the IRS raised the reporting threshold for Forms 1099-MISC and 1099-NEC from $600 to $2,000 per person per year. Most customers who earn a $50 or $100 referral reward will never reach it. Collect a W-9 only when someone’s yearly total could.

Key Takeaways

• The threshold changed: For 2026 payments, the 1099-MISC and 1099-NEC reporting threshold is $2,000, up from $600.
• Totals are yearly, per person: What matters is the total you pay one person in a calendar year, not the size of one reward.
• Most customers stay under it: A past customer who sends two or three referrals a year is nowhere near $2,000 at typical reward levels.
• Frequent referrers need a plan: Collect a W-9 once a person’s yearly total gets close to the threshold.
• Partners are a separate case: Realtor and business partner payments raise different rules, including RESPA.

What exactly changed for 2026?

The dollar threshold for filing. The IRS Instructions for Forms 1099-MISC and 1099-NEC state that for tax years beginning after 2025, the minimum threshold for reporting certain payments, and for backup withholding on those payments, increased to $2,000. The instructions add that the amount may be adjusted for inflation beginning in 2027.

Before this change, the familiar number was $600. Many home service companies built their referral payout process around that number, which meant chasing W-9s from customers who had earned only a few hundred dollars. For most programs, that paperwork is now far less common.

Do you need a W-9 from every customer who gets a reward?

No. A W-9 is how you collect someone’s taxpayer identification number so you can file a 1099 if one is required. If a person’s total for the year will stay well under $2,000, most companies do not need one.

That matters because asking for a W-9 is friction. An owner at All Things Moving described it honestly: “I do get a little bit of drag whenever I’m like, ‘Okay, we need a W9. Let’s get you on the system.’” A customer who just wanted to thank you with a referral does not expect a tax form in return.

Where you still want one:

• Repeat referrers: Someone who has sent several referrals this year and could pass $2,000.
• Large rewards: If a single reward on a big job is several hundred dollars, a few referrals can add up quickly. If you use tiered rewards by job size, watch the top tier.
• Business partners: Agents, property managers, and other companies who send steady volume.

How do you track who is getting close to $2,000?

Keep a running total per person, per calendar year. It can be a column in your payout sheet or a field in your CRM. What matters is that someone checks it before each payout.

A simple process:

1. Log every payout: Name, date, amount, and the job it came from.
2. Set an alert point: Pick a number well below $2,000, such as $1,500, and request a W-9 when someone crosses it.
3. Request early: Ask for the form before the payout that would push them over, not in January.
4. Reset each year: Totals start over on January 1.

This matters more than it sounds. Across 300+ moving companies on Snoball, about 50% of new referrals come from someone who has already referred at least once. Your best referrers are exactly the people whose totals grow. Paying them quickly keeps them referring, which is the point of our piece on fast, reliable referral payouts. A surprise tax form in the middle of that slows everything down.

Does it matter whether the reward is cash or a discount?

It can. A cash reward, check, or gift card paid to a referrer is a payment. A discount the new customer gets on their own job is typically handled as a lower price, not a payment to them. How your business should treat each one, and which form applies to cash rewards, is a question for your accountant.

The practical point: decide the reward type before launch and keep the records consistent, so your accountant sees a clean picture at year end.

What about paying real estate agents for referrals?

That is a different question with different rules. Payments to real estate agents for referring moving customers can raise issues under RESPA, the federal law covering settlement services, on top of any tax reporting. Before paying agents, read our breakdown of what RESPA actually covers and talk to your attorney.

For partners who do qualify for payment, collect the W-9 upfront. Partners tend to send more volume than past customers, so their totals reach the threshold faster.

What should you do this week?

• Update your payout rules: Replace any $600 trigger in your process with the current $2,000 threshold, after confirming with your accountant.
• Stop blanket W-9 requests: Ask only people whose yearly total could reach the threshold.
• Add a running total: Track payouts per person, per year, with an alert point below $2,000.
• Separate partners: Collect W-9s from business partners at the start.

This article is general information, not tax or legal advice. Tax rules change and your situation may differ; talk to your accountant before changing how you pay or report referral rewards.