The IRS released a draft revision in late July to Form W-9, Request for Taxpayer Identification Number and Certification. The “cover date” on the draft is October 2023, but there is no word yet on whether the IRS will finalize and issue the new form next month.
Vendors provide a W-9 form with their taxpayer identification number and classification to organizations that hire them. Organizations need vendor taxpayer ID numbers and tax classifications for reporting payments made to the vendors and contractors to the IRS.
Line 3 of the W-9 is where the payee identifies its tax classification. Classifications include individual/sole proprietor, partnership, S-corporation, C-corporation or trust/estate. The new draft version of the form breaks line 3 into two lines, 3A and 3B. The new Line 3B is designed to capture flow-through entities (e.g., partnerships, trusts or estates) with foreign partners, owners or beneficiaries (direct or indirect).
Capturing Foreign Flow-through Ownership
The new checkbox is for entities that select “partnership” or “trust/estate” on line 3A (the current line 3). The new form requires these entities to check line 3B if they have foreign partners, owners or beneficiaries. “Partnership” includes a limited liability company classified as a partnership.
The IRS intends the change to give flow-through entities information regarding indirect foreign partners, owners or beneficiaries for purposes of complying with relevant reporting requirements. Partnerships with indirect foreign partners might have to complete Form 1065, Schedules K-2 and K-3. Schedules K-2 and K-3 are relatively new reporting forms that pass-through entities must complete; reporting began in the 2021 tax year.
As noted, the IRS has not announced the release date of the revised Form W-9. Once it has, organizations will be required to accept the new version. For a look at the draft version of the revised form W-9, click here.
VendorInfo continues to monitor and will notify readers when the IRS issues the final revised W-9 form.
For information on how VendorInfo can automatically verify your vendor tax information, contact us.