United States

New W-9 published reflects TCJA’s reduced backup withholding rate

Payers urged to update systems for new W-9 and 24 percent withholding

TAX ALERT  | 

The Internal Revenue Service (IRS) has published a revised Form W-9, Request for Taxpayer Identification Number and Certification, and a revised Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Companies should begin collecting the new version of Form W-9 immediately from any new customers, vendors or investors on boarded after October 2018, and should update their systems, policies and procedures to reflect changes in the form and publication as soon as possible.

The only significant change on the new Form W-9 is that it reflects the reduced backup withholding rate of 24 percent. The Tax Cuts and Jobs Act (TCJA) reduced the U.S. backup withholding rate applied to certain reportable payments (such as interest, dividends, rents, royalties and non-employee compensation) that are made to U.S. persons from 28 percent to 24 percent effective after December 31, 2017. As a result of this change, the IRS issued a revised Form W-9 (Rev. October 2018) updated for the new backup withholding rate along with a newly revised Publication 1281, which provides useful information on back-up withholding requirements for payees with missing or incorrect taxpayer identification numbers or for withholding done in error or at an incorrect rate.

Companies that routinely make payments to U.S. persons should make sure that all business areas within the organization responsible for collection or review of Forms W-9 are aware of the new form, have updated their systems and procedures to reflect the reduced rate of backup withholding, and are familiar with revised guidance in Publication 1281.

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