Tax & Accounting Blog

Ask the Expert: Is it a problem that we have received a Form W-9 with a taxpayer ID number starting with a “9”?

ONESOURCE, ONESOURCE Nonresident Alien Taxation, Tax Information Reporting, Trust Tax, W-8 & W-9 Foreign Reporting April 26, 2013

Is it a problem that we have received a Form W-9 with a taxpayer ID number starting with a “9”?

Answer from Marianne Couch of COKALA Tax Information Reporting Services:
Not all TINs beginning with a “9” are a problem. It is true that social security numbers (SSNs) never begin with a “9”. When an individual’s TIN starts with a “9” it is an ITIN, Individual Taxpayer Identification Number, assigned to an individual who was not qualified to be assigned a SSN. ITINs look like SSNs, with 9 as the first number, and for many years a range of only 70-88 in the fourth and fifth digits, but effective April 12, 2011, the range was extended to include 900-70-0000 through 999-88-9999, 900-90-0000 through 999-92-9999 and 900-94-0000 through 999-99-9999.

One of the reasons ITINs are issued is for U.S. resident aliens without work authorization to file U.S. tax returns to report unearned income like dividends, interest, royalties. (Work authorized aliens are issued SSNs.) Examples of legal U.S. residents with ITINs are those who need the ITIN to open a brokerage or bank account; need an ITIN to be claimed as a dependent on a U.S. tax return such as spouses or children of a student under an F-1 or J-1 visa who are not authorized to work in the U.S.; and “snowbirds” (for example, persons from Canada) who overstay the substantial presence threshold and need to file U.S. returns. These individuals, if they meet the substantial presence test as explained in IRS Publication 519, also get Forms 1099.

Do not assume that everyone who gives you an ITIN is a foreign person for tax purposes; some are and some are not. If they are claiming U.S. status on a W-9, you are probably OK unless you have other facts – for example, a foreign address on file which would give you reason to doubt the W-9. The more serious concern regarding ITINs involves those who render services in the U.S. illegally on a contractor basis and provide the ITIN for payments reportable on the Form 1099-MISC. If this occurs, consult your immigration counsel on appropriate actions.

On the employer identification number (EIN) side, only EINs beginning with “98” are of concern, as possibly indicating a foreign entity. Other EINs beginning with “9” are perfectly appropriate on Form W-9 since they are issued to U.S. companies, trusts, and estates. It is only the “98” range of EINs that has been issued mostly to non-U.S. entities and that is listed in I.R.C. section 1441 presumption standards as an indication of probable foreign status. Regulation sec. 1.1441-1(d)(1) reads as follows: “Absent actual knowledge or reason to know otherwise, a withholding agent may rely on [W-9 certification] in order to determine whether to treat a payee or beneficial owner as a U.S. person.” Even though the Form W-9 is authorized to rebut the foreign presumption, IRS uses “98” as a foreign vendor identifier in its audit which means that if the vendor file is pulled for audit, payers will need to be prepared to provide the documentation on file to prove the payee’s status. A “98” EIN on a W-9 may be “reason to know otherwise” and reason to doubt an otherwise valid W-9 on file. Supporting the W-9 with proof of place of payee’s incorporation within the 50 United States or Washington DC or under federal laws or laws of a federally recognized tribal nation would surmount the burden of proof of U.S. status.

About Marianne:
Marianne Couch, JD Principal, Cokala Tax Information Reporting Solutions, LLC Marianne Couch, JD, of the Cokala Tax Group, is an advisor on U.S. federal and state tax information reporting compliance. She is a frequent lecturer at major tax conferences and the author of numerous published articles and the Master Guide to Form 1099 Compliance. Prior to co-founding the Cokala firm in 2007, she served for many years as Research Director of Balance Consulting, and chaired special training and advisory services provided to large organizations and academic and nonprofit institutions. She was previously the executive director of the National Association of Form 1099 Filers, Inc., and a member of the IRS Information Reporting Program Advisory Committee (IRPAC), where she served as Chair of the IRPAC Subcommittee on Small Business and Self-Employed (SBSE) tax issues.

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