Form W-9

Form W-9, "Request for Taxpayer Identification Number and Certification", is the form a U.S. person completes to give their taxpayer identification number to a business or individual that must file an information return reporting a payment to them or another reportable amount. The current revision is Rev. March 2024, and the live version is at www.irs.gov/FormW9.

The form states its own purpose plainly: "An individual or entity (Form W-9 requester) who is required to file an information return with the IRS is giving you this form because they must obtain your correct taxpayer identification number (TIN) ... to report on an information return the amount paid to you, or other amount reportable on an information return." The number supplied may be a Social Security number, an individual taxpayer identification number, an adoption taxpayer identification number or an employer identification number, depending on who is filling it in.

What surprises people is the routing. The form's own header reads "Give form to the requester. Do not send to the IRS." Form W-9 is not filed. It is a document the payer collects and keeps, so that when it later files a Form 1099 the name and number on that return are right.

The certification is four separate statements, and each is made under penalties of perjury. Part II reads: "Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me); and 2. I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and 3. I am a U.S. citizen or other U.S. person (defined below); and 4. The FATCA code(s) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct."

The certification instructions then set out when item 2 has to be struck or does not apply. You "must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return." For real estate transactions item 2 does not apply at all. And for mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement, and generally for payments other than interest and dividends, "you are not required to sign the certification, but you must provide your correct TIN."

The penalties, in the form's own words, and the half that is easy to miss. Under "Penalties" the form provides: "Failure to furnish TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect." Then: "Civil penalty for false information with respect to withholding. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty." Then: "Criminal penalty for falsifying information. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment." These are fixed statutory amounts rather than figures that change with the tax year.

And the fourth one runs the other way: "Misuse of TINs. If the requester discloses or uses TINs in violation of federal law, the requester may be subject to civil and criminal penalties." A W-9 commonly hands over a Social Security number, and the form itself records that the recipient carries an obligation about what it does with the number. That is worth knowing before handing one to someone who has not explained why they need it.

Line 3b is new in this revision and easy to miss. The March 2024 form states: "New line 3b has been added to this form. A flow-through entity is required to complete this line to indicate that it has direct or indirect foreign partners, owners, or beneficiaries when it provides the Form W-9 to another flow-through entity in which it has an ownership interest." The instruction for the line supplies the trigger: "You must check the box on line 3b if you receive a Form W-8 (or documentary evidence) from any partner, owner, or beneficiary establishing foreign status or if you receive a Form W-9 from any partner, owner, or beneficiary that has checked the box on line 3b." So the obligation propagates upward through tiers of partnerships, and a partnership that checks the box may then need Schedules K-2 and K-3.

Line 1 is counterintuitive for a business owner, and getting it wrong has a consequence. The form directs: "Name of entity/individual. An entry is required. (For a sole proprietor or disregarded entity, enter the owner's name on line 1, and enter the business/disregarded entity's name on line 2.)" Putting the trade name on line 1 while entering the owner's identification number in Part I gives the payer a name and number that do not match, which is one of the situations that leads the IRS to tell the payer the number is incorrect, and backup withholding follows from that. Published material on backup withholding covers what happens next and at what rate.

W-9, W-8 and W-4 are three different forms and get confused constantly. Form W-9 is for a U.S. person giving a taxpayer identification number to a payer. The form itself says that a foreign person, or the U.S. branch of a foreign bank treated as a U.S. person, should "not use Form W-9. Instead, use the appropriate Form W-8 or Form 8233". And Form W-4 is an employee's withholding certificate given to an employer, which is a different relationship producing a different document at year end.

The form is not a one-time exercise. Under "Updating Your Information" it provides that "you must furnish a new Form W-9 if the name or TIN changes for the account", and that you must provide updated information to anyone to whom you claimed exempt-payee status if you are no longer exempt and expect further reportable payments. A business that changes its entity classification, or an individual who changes their name, has a form to reissue.

A payer that expects to file an information return asks for a Form W-9 before it pays. The payee enters the correct name on line 1, the business name if any on line 2, checks a federal tax classification on line 3a, checks line 3b if it applies, gives an address, enters the taxpayer identification number in Part I, signs Part II, and returns the form to the payer. The payer files it away and uses the name and number on it when preparing Forms 1099 after year end. Nothing is sent to the IRS at this stage.

A hypothetical on the penalty side. Priya freelances for four clients in one year and declines to give a correct taxpayer identification number to any of them. The form's Penalties section provides a penalty of "$50 for each such failure unless your failure is due to reasonable cause and not to willful neglect." Four requesters, four failures, so $50 times 4, or $200. That figure is separate from what happens to the payments themselves: a payer without a correct number must begin backup withholding, which published material on that subject covers, so Priya loses the use of a share of each payment until she files a return and claims the credit.

Now change one fact. Suppose Priya instead furnishes a number but falsely certifies that she is not subject to backup withholding, and no withholding results. The form provides a $500 civil penalty for "a false statement with no reasonable basis that results in no backup withholding", and adds that willfully falsifying a certification "may subject you to criminal penalties including fines and/or imprisonment." Refusing to complete the form and completing it falsely are different acts with different consequences, and the second is the more serious one.

What the form does well

• It is short, it is free, and the whole obligation is discharged once for each payer.
• Because it is never filed with the IRS, completing one creates no filing obligation and no return to track.
• Furnishing a correct number is what prevents backup withholding, so the form is the cure as well as the request.
• The form itself records the requester's exposure for misusing taxpayer identification numbers, which is a genuine constraint on the person collecting it.

What to be careful about

• It commonly carries a Social Security number for an individual, and the form is transmitted by whatever means the requester chooses, which is often email.
• The certification is made under penalties of perjury, so it should be read rather than signed on the assumption that it is routine paperwork.
• Legitimate requesters and phishing attempts produce identical-looking requests. A genuine request comes from someone with an information-reporting obligation arising from a transaction with you, which is not always a payment to you: mortgage interest, cancellation of debt and real estate transactions all generate one.
• Line 1 is worth double-checking, because a name and a number that do not match is one of the triggers for backup withholding.
• It is not a one-time form. A change of name, taxpayer identification number or exempt-payee status requires a new one.