IRS Publishes New Form W-9

IRS publishes new W-9 Form

Support for the new W-9 2024 revision will be rolled out to TAINA customers by the end of April 2024.

In a previous article we covered the news of a new draft of Form W-9. The Draft was released on July 26, a with a revision date listed as October 2023 was published on the Internal Revenue Service (IRS) website. On March 6, the IRS unveiled the new W-9 form with a revision date of March 2024.

The Form W-9 is a critical document used by financial institutions and other entities to request U.S. taxpayer identification information from their clients, such as individuals, partnerships, corporations, and others. This form serves a crucial role in the tax reporting process, ensuring compliance with the IRS) regulations.

The key updates to the W-9 form relate to a new tax classification election for flow-through entities to indicate that it has direct or indirect foreign partners, owners, or beneficiaries. The impacted regime would be the Foreign Account Tax Compliance Act (FATCA), therefore affecting Financial Institutions with 1099 reporting obligations.

Summary of W-9 Form Changes

Changes from revision of 2018 to the 2024 include:

• The notable change in the March 2024 revision of Form W-9 is the addition of a new line 3b
  • "If on line 3a you checked “Partnership” or “Trust/estate,” or checked “LLC” and entered “P” as its tax classification, and you are providing this form to a partnership, trust, or estate in which you have an ownership interest, check this box if you have any foreign partners, owners, or beneficiaries. See instructions"
• The inclusion of this new line is intended to identify the presence of indirect foreign connections within flow-through entities more explicitly. Flow-through entities, which pass their income through to their owners or partners for tax purposes, are now required to complete this line if they have direct or indirect foreign partners, owners, or beneficiaries.
• The IRS recognizes that certain partnerships with indirect foreign partners may have additional reporting requirements, such as completing Schedules K-2 and K-3. By mandating the inclusion of line 3b, the IRS aims to provide these entities with a clear means of indicating the status of their indirect foreign partners, owners, or beneficiaries.
• In addition to this change, a new instructional line has been added to the top of the new March 2024 Revision;
  • "Before you begin. For guidance related to the purpose of Form W-9, see Purpose of Form, below"

W-9 Instructions Update:

The instructions highlight what’s the new election in the 2024 revision:

• "Line 3b. A new line has been added for partnerships (including limited liability companies (LLCs) classified as partnerships for U.S. federal tax purposes), trusts, or estates to indicate if they have foreign partners, owners, or beneficiaries when providing this form to a flow-through entity in which it owns an interest. This change provides the flow-through entity with information regarding the status of its indirect foreign partners, owners, or beneficiaries, so that it can satisfy any applicable reporting requirements. 
• You are only required to verify that the box on line 3b has been properly checked if you are a flow-through entity that is otherwise required to obtain a new Form W-9 from your partner, owner, or beneficiary. You may rely on the information provided on line 3b unless you know that it is incorrect. If line 3b is completed (or if it has not been completed and you know that this is incorrect), you may be required to report on Schedules K-2 and K-3 (Form 1065) or otherwise provide the relevant information to your partner, owner, or beneficiary. See Partnership Instructions for Schedules K-2 and K-3 (Form 1065)."

Impact on Financial Institutions:

Financial institutions must be prepared for these changes and update their processes accordingly. The new line 3b will necessitate an added layer of scrutiny when processing Form W-9 submissions from flow-through entities. Institutions will need to ensure that these entities complete line 3b accurately and provide the necessary information about their indirect foreign partners, owners, or beneficiaries.

Organizations should start planning updates for information collection and form validation to accept the new Form W-9. The revision effective date is listed as March 2024. As such, the validation of prior versions of the W-9 form will be allowed up to December 2024. The latest date to adopt the W9 2024 revision would be December 31, 2024.

Staying informed and monitoring regulatory changes is crucial to ensuring compliance with the evolving laws, regulations, and guidelines that govern the financial industry. The TAINA Platform continues to evolve to ensure we provide our clients with guaranteed reliable performance and robust compliance. With the help of Big 4, the TAINA platform is being updated to align with all the recent changes to the 1042-S instruction changes, W-8EXP 2023 revision and W-9 2024 revision.

If you have any questions about the W-9 form changes or TAINA's solution for accepting the new revision of the W-9 please reach out to us. If you would like to see how the TAINA FATCA, CRS and QI Compliance Platform can add value to your business, request a demo today.