IRS published a draft of new Form W-9, effective date of October 2018
The Internal Revenue Service has published an early release of a new draft version of Form W-9, Request for Taxpayer Identification Number and Certification along with updated form instructions and new draft Instructions to the Requester of Form W-9. While the October 2018 version of the form has yet to be finalized, since the IRS published an early release of the form followed by instructions on Aug. 6, 2018 listing the same effective date of October 2018, it is likely that October 2018 will be the effective date of the form once it is finalized. Withholding agents should be prepared to start collecting new W-9s sometime in October 2018, assuming that the IRS will finalize and publish the revised form next month as the draft announcements have implied.
Form W-9 is used by U.S. persons (including U.S. citizens, resident aliens, and companies formed or organized in the U.S.) to certify their taxpayer identification number, their exemption from certain reporting requirements, or their back-up withholding status. Aside from listing the new back-up withholding rate of 24 percent that was introduced with the Tax Reform Act of 2017, there are no significant changes between the prior version of the form as published in November 2017 and the new draft version published with an effective date of October 2018.
To the extent that withholding agents already have a valid form W-9 on file for a customer or investor as of the date that the IRS publishes a revised final version of Form W-9, they can continue to rely on that form and are not required to collect a new form after the IRS publishes a revision. It is important to note, however, that unlike IRS Forms W-8, which generally have a six-month grace period after release before withholding agents are required to use the new form, Form W-9 has no similar grace period and newly published versions of Form W-9 become effective immediately once a final version is published by the IRS.
Therefore, withholding agents should take action now to ensure they are fully prepared to begin collecting and accepting the new Form W-9 from new customers, investors, and vendors, who open accounts or are onboarded after the date that a new final version of Form W-9 is published – which could be as early as October 2018. For many companies, this update may mean changes to their substitute W-9 forms, updates to their policies and procedures, or drafting new communications to customers or investors onboarded or opening accounts after October 2018.
Regardless of when the form is finalized (and we suspect that it will be soon), withholding agents should evaluate the impact of these changes and update their systems and processes now to ensure that they are prepared to begin accepting the new version of Form W-9 once it is finalized.