4 Key Takeaways on Recent Form W-8 and Form W-9 Changes

Wendy Walker
January 19, 2024

Last year, Sovos and Comply Exchange held a customer roundtable discussion on recent Form W-8 and Form W-9 changes.

Here are some of the top points that participants brought up during the roundtable.

Decentralized organization challenges 

In the realm of decentralized organizations, a recurring issue emerged – tax reporting departments often unearth problems with Form W-8 and W-9 changes when it’s already too late. Typically, problems are discovered when penalties are looming. This revelation underscores the urgent need for more streamlined processes and heightened vigilance within decentralized structures.

W-8 and W-9 challenges  

The discussion also delved into specific challenges related to Form W-8 and Form W-9 changes, including:

  • DBA vs. IRS names: The distinction between providing a Doing Business As (DBA) name and an IRS-registered name became a focal point. Determining which name to use, especially when individuals furnish both personal and trust names along with an Employer Identification Number (EIN), poses a considerable challenge.
  • Training initiatives: Recognizing the complexity of these forms, the roundtable emphasized the necessity of training. Internal teams must be equipped to discern potential issues when processing W-8s and W-9s. Simultaneously, comprehensive training for payees is crucial to ensure forms are being completed correctly.
  • Expiration tracking: An often-overlooked aspect surfaced: the need to meticulously track the expiration of W-8 forms. This highlighted the importance of proactive management to prevent lapses in compliance.

Audits and penalties: navigating choppy waters

It can also be increasingly difficult to navigate audits as they arise and subsequent penalties.

For example, historical trends in audits were discussed, indicating that audits frequently commence with 1042-S and 1042 forms. Importantly, auditors may request current and previous W-8s, emphasizing the importance of preserving all versions collected over the years.

Additionally, fostering a relationship with auditors is crucial. This involves educating them on a company’s unique business model and how internal policies and procedures align with that model. Such proactive engagement can contribute to a smoother audit process.

Finally, participants noted a general uptick in penalties, particularly name/TIN mismatch related penalties. The surge extended to 1099-R forms, where TIN matching is prohibited. The debate around providing a TIN type to the IRS in the 1099 file raised questions about its role in contributing to the increase in mismatches and subsequent penalties.

What comes next?

The discussion didn’t end without glimpses into the future:

  • Draft W-9: Participants expressed interest and concern about the impending Draft W-9. The absence of draft instructions aligned with the form left many with more questions than answers.
  • W-9 revisions and implementation: Once finalized, revisions to the W-9 form were earmarked for future discussion, underlining the importance of staying current on changes.
  • eFiling Updates: Future roundtables are expected to delve into the ever-evolving landscape of eFiling, covering topics such as Transmittal Control Code (TCC) updates and Modernized e-Filing.

Overall, the roundtable highlighted the intricacies of tax reporting, along with the necessity for organizations to reevaluate their processes, enhance training programs and prepare for the evolving landscape of regulatory requirements. As the industry navigates the increasingly complex and demanding requirements of regulatory change, collaboration and proactive measures are key to mitigating risks and ensuring compliance.

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Reach out to our team for more information on how the Sovos and Comply Exchange partnership offers an end-to-end tax information reporting and withholding solution.

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Wendy Walker

Wendy Walker is the principal of Tax Information Reporting solutions at Sovos. She has more than 15 years of tax operations management and tax compliance experience with emphasis in large financial institutions, having held positions with CTI Technologies (a division of IHS Markit), Zions Bancorporation and JP Morgan Chase. Wendy has served as a member of several prominent industry advisory boards. She graduated with a BS in Process Engineering from Franklin University and earned her MBA from Ohio Dominican University, in Columbus, Ohio.
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