New TIN Certification Requirement by BOL GURU Mary Beth Guard
Buried in ninety-nine pages of text in a final regulation published by the I.R.S. on May 22, 2000 in the Federal Register is a change that will impact every insured financial institution. The little-known amendment to Section 1.1441-1(d) of the IRS regulations makes important changes to IRS Form W-9, Request for Taxpayer Identification Number and Certification, and to the substitute W-9 that many institutions elect to incorporate into their business forms in lieu of the actual IRS form. The changes take effect January 1, 2001.
UPDATE (1/7/01): The IRS has extended the deadline for the mandatory use of the revised W-9 Form until June 30, 2001. Payors must use the revised form for all new solicitations after that date. The revision requires a payee to certify that he or she is a U. S. citizen. Additional information regarding the extension will be contained an Internal Revenue Bulletin on February 20, 2001.
According to Bankers Systems, Inc., the St. Cloud, Minnesota-based bank compliance company, the change is catching many institutions off guard. The revision received virtually no publicity, either when it was originally adopted or in the months leading up to its effective date, and most bankers are unaware of the new compliance requirements. This article will bring you up to speed and help ensure you are in compliance come January 1, 2001.
Background
Financial institutions must obtain correct taxpayer identification numbers (TIN)on all individuals on whom it must file an information return with the IRS. (1099, 1098, and variations thereof.) The request for TIN must be made on a W-9 form, but institutions are permitted to utilize a substitute W-9 that they can incorporate into their business forms, so long as it is substantially similar to the actual W-9 and includes the requisite certifications. Most institutions have incorporated substitute W-9s into their loan and deposit documents.
What is the change?
The revised regulation clarifies that a Form W-9 serves as a representation of U.S. status and should only be furnished by a U.S. person. Beginning 1-1-01, only a U.S. person (including a U.S. resident alien) may use a W-9 form. A foreign person will be required to instead use Form W-8. (Note: In the past, IRS preferred for a foreign person to use a Form W-8; this now makes it mandatory.)
The W-9 form and its instructions have been revised. There is now a new certification in Part III(3) under which the person completing the form certifies under penalty of perjury that they are a U.S. person. This certification must be incorporated into any substitute W-9 form as well.
How to Be Prepared
Because this regulation was such a sleeper, it is unlikely most software companies can complete the necessary revisions by January 1, but by simply printing out and using paper copies of the revised W-9 form for use in the interim, institutions can meet the IRS requirements.
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