The IRS does not require most W-9 forms to be signed, but companies typically ask for all W-9 forms to be signed. This requirement can be waived if companies reduce the time and effort of obtaining W-9 forms by not requiring a signature unless there are specific requirements. There are three areas where a W-9 form needs to be signed, which include financial transactions, FATCA payments, and B notices.
FATCA payments are typically financial transactions made to a foreign corporation, insurance company, bank, or other related foreign financial institution. Taxpreplv recommends that companies request an unsigned W-9 unless there is a specific requirement for a signature.
W-9 forms are required to be signed by the IRS
There are three areas where a W-9 form needs to be signed. Most of these do not relate to payments reported on a 1099-MISC.
W-9 forms related to the following financial transactions are required to be signed.
- Interest accounts – bank interest (1099-INT)
- Dividend accounts (1099-DIV)
- Barter exchange accounts (1099-B)
- Broker accounts (1099-B)
- Original issue discounts (1099-OID)
- Patronage dividends (1099-PATR)
- Real estate transactions (1099-S)
The IRS also requires that a signed W-9 form is obtained when a company receives the first “B” notice from the IRS. A “B Notice” (CP2100/A) is sent by the IRS when the name and the TIN number on a 1099 form issued by a company to a vendor do not match the IRS files or the files of the Social Security Administration. Companies are then required to obtain a new W-9 form from their vendor and the new W-9 form must be signed. If a company has not received any of these notices, this signature requirement is not applicable.
U.S. companies that make payments subject to FATCA rules that are paid to a foreign corporation, insurance company, bank or other related foreign financial institution could be required by the IRS to withhold 30% of the gross payment. However, this withholding requirement can be avoided if the company receives a signed W-9 form. By signing the W-9 the signer certifies under the penalty of perjury that they are “a U.S. citizen or other U.S. person.” This W-9 certification tells the company that FATCA does not apply and the payment is subject to the standard 1099 guidelines. Note that this applies to payments made in the course of a trade or business.
If no documentation is obtained from the vendor, the U.S. company will be required to apply the FATCA presumption rules. These rules require the company to assume that the vendor is a foreign individual or company and withhold 30%.
What is a FATCA payment?
FATCA payments are typically financial transactions such as loan interest, stock dividends, financial services fees, annuity payments, and life insurance premiums. They also include gross proceeds from the sale or other disposition of any property of a type that can produce U.S. source interest or dividends. The payment is typically made to a foreign corporation, insurance company, bank, or other related foreign financial institution. For additional information visit the IRS’s FATCA page.
At the start of creating every W-9 form, Taxpreplv asks the question “Is the named individual or entity on this Form W-9 a U.S. citizen or a U.S. person?” A user can only continue creating a W-9 form if they answer “Yes” to this question. This adds an additional level of assurance that the person or entity creating the W-9 form using Taxpreplv is a US person.
Taxpreplv recommends that companies request an unsigned W-9 unless there is a specific requirement for a signature. This practice will greatly help speed up the W-9 collection process as anyone in the vendor’s accounting department can complete the W-9 request. Otherwise, there may be a delay while the accounting department works to get an authorized person to sign the form. Create and send your own W-9 form using Taxpreplv today! It’s always free.
Listed below are some additional technical references related to W-9 form signature requirements.
Form W-9 Instructions, Part II. Certification
The instructions for Form W-9 include a specific section related to the signature (certification) requirements.
To establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if item 1, 4, or 5 below indicates otherwise.
For a joint account, only the person whose TIN is shown in Part I should sign (when required). In the case of a disregarded entity, the person identified on line 1 must sign. For exempt payees, see the Exempt payee code, earlier.
Complete the certification as indicated in items 1 through 5 below.
- Interest, dividend, and barter exchange accounts were opened before 1984 and broker accounts were considered active during 1983. You must give your correct TIN, but you do not have to sign the certification.
- Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts were considered inactive during 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form.
- Real estate transactions. You must sign the certification. You may cross out item 2 of the certification.
- Other payments. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. “Other payments” include payments made in the course of the requester’s trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments made in settlement of payment card and third party network transactions, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations).
- The mortgage interest paid by you, acquisition or abandonment of secured property, cancellation of debt, qualified tuition program payments (under section 529), ABLE accounts (under section 529A), IRA, Coverdell ESA, Archer MSA or HSA contributions or distributions, and pension distributions. You must give your correct TIN, but you do not have to sign the certification.
Form W-9 Form, Certification Instructions
The certification instructions detailed on Form W-9 state that “For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the certification, but you must provide your correct TIN.”
Instructions for the Requester of Form W-9, Electronic System
The Instructions for an electronic system state “For Forms W-9 that are not required to be signed, the electronic system need not provide for an electronic signature or a perjury statement.”
Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s)
The IRS notes under the First “B” Notice section, page 12, that “it is your responsibility to send the appropriate “B” Notice to the payee, when required, to obtain the correct Name/TIN. This information may not be solicited by telephone. You need a TIN that the payee certifies as correct on Form W-9 in order to stop current backup withholding or prevent backup withholding from starting.”
FATCA Presumption Rules
The Instructions for the Requester of Forms W-8 includes a section that explains the IRS presumption rules. These rules state that “if you do not receive a valid Form W-8 or Form W-9 that you may rely upon under the due diligence requirements, or cannot otherwise determine whether a payment should be treated as made to a U.S. or foreign person, you must apply the presumption rules provided in the Regulations under sections 1441, 1446, 1471, 6045, and 6049. If the presumption rules are applied to treat a person as a foreign person, the 30% withholding rate applies and cannot be reduced (for example, no treaty rate). You may not rely on the presumption rules if you have actual knowledge that a higher withholding rate is applicable. If you determine that you are making a withholdable payment to an entity and cannot reliably associate the payment with a Form W-8 or other permitted documentation that is valid for chapter 4 purposes, you are required to treat the entity payee as a nonparticipating FFI.”
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While the IRS does not require most W-9 forms to be signed, most companies still require a signature on the form. However, this requirement can be waived by companies to reduce the time and effort of obtaining W-9 forms unless specific requirements need to be met. Specific signature requirements exist for financial transactions, FATCA payments, and B notices. FATCA payments are typically financial transactions made to a foreign corporation, insurance company, bank, or other related foreign financial institution.
Do I need to sign the W-9 form I received from my employer?
Most of the time, companies ask for a signature on W-9 forms. However, it is not a requirement by the IRS.
When do I need to sign a W-9 form?
There are three areas where a W-9 form needs to be signed: financial transactions, FATCA payments, and B notices.
What are FATCA payments?
FATCA payments are financial transactions made to foreign corporations, insurance companies, banks, or other related foreign financial institutions.
How does signing a W-9 form help avoid FATCA withholding?
By signing the W-9 form, the signer certifies that they are a US citizen or other US person, allowing companies to avoid 30% FATCA withholding.
What is a B notice?
A B notice is a notice sent by the IRS to a company when the name and TIN number on a 1099 form issued to a vendor do not match the IRS files.
When is a W-9 form required to be signed by the IRS?
A W-9 form needs to be signed for financial transactions such as interest accounts, dividend accounts, broker accounts, patronage dividends, and real estate transactions.
How does Taxpreplv assist with W-9 forms?
Taxpreplv asks if the named individual or entity is a US citizen or US person. This helps assure the person or entity creating the W-9 form is a US person.
Should I request an unsigned W-9 form?
Yes, it is best practice to request an unsigned W-9 unless there is a specific requirement for a signature. This speeds up the collection process.
What happens if no documentation is obtained from a vendor for FATCA payments?
If no documentation is obtained from the vendor, the US company will be required to assume the vendor is a foreign individual or company and withhold 30%.
What additional technical references relate to W-9 form signature requirements?
Form W-9 Instructions, Part II. Certification is a specific section of the instructions for Form W-9 that relates to signature requirements.