The IRS has released a final revised version of Form W-9, Request for Taxpayer Identification Number and Certification, with a new reporting requirement for flow-through entities. The updated Form W-9 has a March 2024 revision date. Withholding agents should use of the new form as soon as possible, especially if the withholding agent is a flow-through entity that will need to determine its Schedule K-2/K-3 reporting requirements (discussed below). Forms W-9 previously collected by a withholding agent do not expire or need to be refreshed.

A draft version was previously published by the IRS in 2023 (see Tax Alert 2023-1374).

Background

US persons (e.g., US citizens, resident aliens, entities created or organized in the US, etc.) complete Form W-9 to furnish their taxpayer identification number (TIN) and federal tax classification to anyone making certain reportable payments to them. While Form W-9 is not filed with the IRS, the person requesting the Form W-9 generally must use the information to file various information returns with the IRS reporting payments to a payee, financial relationships maintained, and other information. Form W-9 is also used for purposes of establishing an exemption from backup withholding tax (if applicable). The IRS last revised Form W-9 in October 2018.

New Line 3b

The updated Form W-9 adds Line 3b for flow-through entities (e.g., partnerships, trusts or estates) with direct or indirect foreign partners, owners or beneficiaries. The final version of the form makes clear that a flow-through entity must complete Line 3b when providing a Form W-9 to another flow-through entity in which it has an ownership interest.

The reason for this new check box is so the receiving flow-through entity can determine its IRS reporting requirements. For example, the General and Specific Instructions on the updated Form W-9 note that a partnership with indirect foreign partners may be required to complete Form 1065, US Return of Partnership Income, Schedule K-2, Partners' Distributive Share Items — International, and Schedule K-3, Partner's Share of Income, Deductions, Credits, etc. — International. Schedules K-2 and K-3 are forms of US-international tax relevance that flow-through entities generally must complete, beginning in the 2021 tax year (See Tax Alert 2022-0152).

EY observes: Revised Form W-9 requires Line 3b to be checked when "providing this form to a partnership, trust, or estate in which you have an ownership interest." Therefore, Line 3b does not apply, for example, when a broker receives a Form W-9 from an account holder or an accounts-payable team receives the form from a vendor.

In commenting on the draft form, industry noted that a broker or other payor may be classified as a partnership for US federal tax purposes. It is now clear that Line 3b does not apply when collecting Forms W-9 from non-partners.

Clarification for single-member LLCs

The chart on page 3 of the Form W-9 instructions was updated to remove the reference to a single-member LLC that is disregarded for US federal tax purposes. The change appears to respond to comments from industry, which found the reference on the chart confusing because a disregarded entity should not be completing a form in its own name. Instead, the name provided in line 1 of a Form W-9 should be the owner of the disregarded entity and the checkbox on Line 3a should correspond to the US federal tax classification of the owner.

Reliance on prior version of Form W-9

No rules specify whether a withholding agent can continue to accept the prior version of Form W-9 for a transition period, unlike the rules for Forms W-8, which generally allow withholding agents to continue accepting the prior version of the form until the end of six full months after the revision date. Withholding agents will need to use the new form if the withholding agent is a flow-through entity that needs to determine its Schedule K-2/K-3 reporting requirements. Forms W-9 previously collected by a withholding agent do not expire or need to be refreshed due to the publication of a new version.

EY observes: There are different documentation scenarios for the revised Form W-9 depending on who is collecting and providing the form. Based on the specific relevance and application of Line 3b, payors, brokers and withholding agents could consider using the following as a guideline for collecting Forms W-9: