In a draft revised version of Form W-9, Request for Taxpayer Identification Number and Certification, the IRS includes a new certification for US digital asset brokers and a requirement that sole proprietors use their own SSNs instead of the EINs of their sole proprietorships or disregarded entities. The updated Form W-9 has a January 2026 revision date.

Background

US persons (e.g., US citizens, resident aliens, entities created or organized in the US) complete Form W-9 to furnish their taxpayer identification numbers (TINs) to anyone from whom they receive certain payments that are reportable on Form 1099. While Form W-9 is not filed with the IRS, the Form W-9 requester generally must use the information to file various information returns with the IRS. Form W-9 also generally exempts the Form W-9 provider from backup withholding. The IRS last revised Form W-9 in March 2024 (see Tax Alerts 2024-0584, 2024-0854).

US digital asset broker certifying status as exempt recipient

The draft Form W-9 adds a fifth certification in Part II that allows the signer to certify that it is a US digital asset broker other than a registered investment adviser. This certification is accompanied by a checkbox — the only certification on the form that uses a checkbox. Checking the box seems to have two effects. First, the provider of the form would be considered an exempt recipient under IRC Section 6045 and therefore not subject to Form 1099-B or DA reporting. Second, in a sale "effected" by multiple brokers, a digital asset broker that receives the form and is not first broker to credit the gross proceeds on the sale to the customer's wallet or account is not required to report the sale on Form 1099-DA, which prevents the ultimate customer from receiving more than one Form 1099-DA.

EY observes: The new certification raises several practical and operational issues. In the past, the IRS has insisted that payors incorporating substitute Forms W-9 into account opening agreements or electronic systems include all the certifications, even those that are not relevant to the payor's client base. For example, the fourth certification, relating to an exemption from FATCA reporting, is only relevant for financial institutions outside the United States; the Instructions for the Requester of Form W-9, however, require that certification to be included on substitute forms used inside the United States. All requesters of Form W-9 — even those who are not using the form in a digital asset context — would presumably need to update their substitute and electronic Forms W-9 to comply with the changes because the requester instructions and IRS Revenue Procedure 92-26 require the certifications to be clearly stated as in the official IRS Form W-9. On the other hand, additional guidance could allow this certification to be omitted from substitute Forms W-9 if not relevant to the requester's fact pattern.

Industry previously recommended that the IRS use the existing box for exempt payee codes to deal with the multiple-broker issue, specifically to avoid the issue of whether changes to the certification require changes to substitute forms. The draft Form W-9 does, in fact, include a new exemption code for "[a] payee in a transaction involving digital assets exempt from backup withholding under Notice 2025-33 through calendar year 2026." Notice 2025-33 (in combination with Notice 2024-56), however, provides relief from backup withholding for all transactions and does not suggest that relief would be limited to those that provide an exemption code on Form W-9 (see Tax Alert 2025-1267). It is unclear what circumstances would require the use of the new exemption code.

Requiring sole proprietors to furnish SSNs instead of EINs

The IRS also updated the language in Part I of the draft Form W-9 (and the corresponding instructions) to require that (1) a sole proprietor furnish an SSN; and (2) a single-member limited liability company (LLC) that is disregarded from its owner provide the owner's SSN if the owner is an individual. The new language specifically instructs sole proprietors and single-member, disregarded LLCs not to report the EIN of the sole proprietorship or disregarded entity.

The new requirement deviates from the current version of the Form W-9 (Rev. March 2024), which states: "If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN. If you are a single-member LLC that is disregarded as an entity separate from its owner, enter the owner's SSN (or EIN, if the owner has one)." Similar guidance allowing single-member LLCs to provide either the owner's SSN or EIN on Forms W-9 appears in Publication 3402 (Rev. March 2020). The General Instructions for Certain Information Returns allow either an SSN or EIN to be used on Form 1099 for a payee that is a sole proprietorship, though "[t]he IRS prefers that you enter the SSN." The language in Part I of the draft Form W-9 also says, "Do not report the … [EIN] of a sole proprietorship or disregarded entity" (emphasis added).

EY observes: The "Do not report … " language could mean that the IRS may be considering a change to current Form 1099 requirements and may require SSNs on Forms 1099 issued to sole proprietors. That might in turn require payors to obtain new Forms W-9 from individuals who have previously provided EINs so that the payors can obtain and use the individuals' SSNs.