Issuance of a new draft Form W-9
On Sept. 17, 2025, the IRS published an early release of the new draft version of Form W-9. The new draft, which has not been finalized, is dated January 2026 and has a new certification with a checkbox for digital asset brokers, and clarifies TIN requirements for sole proprietors and disregarded entities.
More specifically, the ‘Name’ field on line 1 of the new draft Form W-9 includes an instruction to sole proprietors and disregarded entities to enter their owner’s name on line 1 of the form and to enter the business or disregarded entity’s name on line 2 of the form. Part I of the form also clarifies that sole proprietors and disregarded entities must provide the owner’s Social Security Number (SSN) or other personal TIN; they should not enter the disregarded entity or sole proprietor’s employer identification number (EIN) on the Form W-9.
The draft Form W-9 also adds a new checkbox in Part II of the certifications section of the form for certain U.S. digital asset brokers to certify their status and claim an exemption from certain information reporting requirements. Specific language on the new form requires brokers to certify under penalty of perjury that: ‘I am exempt from information reporting as a U.S. digital asset broker within the meaning of Reg. section 1.6045-1(g)(4)(i)(A)(1) (other than a registered investment adviser). I claim exempt status under Reg. section 1.6045-1(c)(3)(i)(B)(12).’ This change applies to brokers that are not registered investment advisers and aligns with the new Form 1099-DA. An additional update to the Form W-9 includes new exempt payee code ‘14’ for transactions involving digital assets exempt from backup withholding through calendar year 2026 in accordance with Notice 2025-33.
RSM US observations: For companies in the digital asset space, additions to the new draft Form W-9 seem to solidify the IRS’ intention to move forward with the reporting of digital assets. Digital asset brokers should review draft certifications carefully to ensure they satisfy all required Forms W-9 and also add fields in their systems to substitute Forms W-9 to ensure they cover new certifications. Payors will also need to properly flag brokers claiming exemption from reporting requirements.
As tax reporting continues to evolve, organizations and financial institutions are encouraged to update their onboarding and compliance procedures to ensure they are collecting correct TIN information. The collection of correct TIN information is crucial for payments made to sole proprietors and disregarded entities as information returns filed with incorrect name and TIN combinations often result in penalties and notices for withholding agents. Similarly, independent contractors are advised to be aware of this change as well as they are now required to use their SSN on the updated Form W-9.
If the Form W-9 is finalized in January 2026, organizations must begin using it immediately. To the extent that organizations already have valid Forms W-9 on file for payees and accountholders prior to the final revised Form W-9 being published, said forms will remain valid and do not need to be replaced.
The IRS will provide a 60-day period for public comments once the final draft of the form is published. Digital asset brokers and others in the industry are expected to provide comments and have expressed concerns with the short time frame for implementation of the form, particularly since budget requests and system modifications are typically made at year end and may take several months to finalize.
IRS will no longer accept paper checks for tax payments
On Sept. 23, 2025, the IRS announced that it will phase out paper tax refund checks for individual taxpayers and will no longer accept paper check payments beginning Sept. 30, 2025, in order to comply with Executive Order 14247, which imposed a government-wide transition from paper to electronic payments.
U.S. withholding agents must therefore be prepared to use electronic payment methods to remit year-end and other withholding tax payments that are made on or after Sept. 30, 2025. To prepare for this new requirement, withholding agents must ensure that their systems and procedures are updated to support electronic remittances. Payors should enroll in the IRS’ Electronic Fund Transfer Payment System (EFTPS) now and verify access to IRS platforms like ID.me and also ensure that banking details are current. Noncompliance with the new requirements will likely cause significant delays in payment processing in 2026.
Jury trial required for willful FBAR penalties
On Sept. 19, 2025, the U.S. District Court for the Northern District of Texas in United States v. Sagoo (No. 4:24-cv-01159, N.D. Tex. 2025) ruled that taxpayers have a right to a jury trial before penalties for willful failure to file FBARs can be assessed. The FBAR (FinCEN Form 114) is an annual requirement for all U.S. persons with a financial interest or signatory authority in a financial account at a foreign financial institution with an aggregate value (balance) of $10,000 or more at any point during the calendar year. FBARs are due on April 15 of every year with an automatic six-month extension to Oct. 15 annually.
The Sagoo court ruled that the IRS violated the taxpayer’s right under the Seventh Amendment of the U.S. Constitution by assessing willful FBAR penalties without a jury trial. The case involved a U.S. citizen with foreign accounts in various countries who was assessed more than $1 million in penalties for ‘willfully’ failing to file his FBARs from 2011 to 2013. The court ruled that taxpayers are guaranteed a jury trial before such penalties can be assessed. Citing the Fifth Circuit’s ruling in AT&T, Inc. v. FTC, 135 F.4th 230, 242 (5th Cir. 2025), the Sagoo court rationed that “…a jury trial that follows an agency’s assessment of civil penalties falls short of what the Seventh Amendment guarantees.” More specifically, according to the court, because the Government (1) adjudicated liability and levied civil penalties against the taxpayer, (2) that had real-world consequences and (3) an after-the-fact trial brought by the Government would be the taxpayer’s sole opportunity to appear before a jury, the Court held that the Government violated the taxpayer’s Seventh Amendment right to a civil jury trial.
RSM observations: While the IRS may appeal, the court’s ruling in Sagoo has implications for both taxpayers and the IRS. The decision will likely cause the IRS to reshape its already vigorous compliance efforts with respect to foreign financial accounts, possibly implementing more selective enforcement of FBAR noncompliance, or shifting its focus from enforcement to its streamlined voluntary disclosure program. Notably, the IRS has already indicated its increased review of information from the IRS’ Foreign Account Tax Compliance Act (FATCA) reporting in comparison with FinCEN’s FBAR Reports to identify noncompliance. Finally, for taxpayers evaluating the consequences and implications of filing late FBARs, it is critical to consider the possibility that penalties for willful failure to file the forms may be imposed. Further, depending on the facts and circumstances involved, the district court’s decision in Sagoo may or may not be relevant depending on the court and jurisdiction involved.
While a victory for the defendant, the Sagoo case also reiterates the seriousness of FBAR enforcement, highlighting the legal risks of noncompliance. Timely and accurate FBAR filings not only avoid steep civil penalties, but also potentially protect taxpayers from escalating legal consequences.
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