What are the new FATCA reporting codes for on Form W-9?

The Foreign Account Tax Compliance Act (FATCA) requires a participating foreign financial institution to report all United States account holders that are specified United States persons.  Certain payees are exempt from FATCA reporting and select a code to identify the specific reason they are exempt.          These codes only relate to accounts maintained at foreign financial institutions, therefore, if the W-9 form is for a U.S. account, this field can be left blank.  Organizations that know their payments are not FATCA related can fill out the FATCA section on the W-9 with an N/A if they find that helpful.

Does a W-9 have 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 instances 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.

“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.