Does a W-9 form have to be signed?

When are W-9s required to be signed?

Most companies ask for all W-9 forms to be signed.  However, it is a relatively unknown fact that the IRS does not require most W-9 forms to be signed (or certified.)  The certification instructions on the W-9 form state that generally for “payments other than interest and dividends, you are not required to sign the certification, but you must provide your correct TIN.”   As most companies outside of the financial sector don’t deal with financial transactions, they can reduce the time and effort of obtaining W-9 forms by not requiring a signature.

W-9 forms 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.

Financial transactions

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)

“B” notice

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.

FATCA payments

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.

W9manager

At the start of creating every W-9 form, W9manager 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 W9manager is a US person.

Best practice

W9manager 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 W9manager today!  It’s always free.

Additional references

Listed below are some additional technical reference 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. Exempt payees, see Exempt payee code, earlier.

Signature requirements.

Complete the certification as indicated in items 1 through 5 below.

  1. Interest, dividend, and barter exchange accounts opened before 1984 and broker accounts considered active during 1983. You must give your correct TIN, but you do not have to sign the certification.
  2. Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts 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.
  3. Real estate transactions. You must sign the certification. You may cross out item 2 of the certification.
  4. 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).
  5. 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.”

Disclaimer – Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. This article is also not a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.