What is changing in the IRS Form W-9: A 2026 update

The W-9 has looked roughly the same for decades. Most people who fill one out have never read the instructions. They find their name, write in their Social Security number or EIN, check a box for their entity type, sign it, and send it back.

That workflow still works for most situations. But several things are changing around the W-9 in 2026 that every business paying contractors should understand. Some of those changes are already law. One involves a proposed new form design that the IRS has published as a draft but not yet finalized.

What Form W-9 is and why it matters

Form W-9 is the IRS's Request for Taxpayer Identification Number and Certification. When a business pays a contractor, freelancer, vendor, or other non-employee for services, it collects a completed W-9 before payment starts. The form gives the business the payee's name, taxpayer identification number (TIN), and tax classification. The business uses that information to file the right information returns at year-end, typically Form 1099-NEC for contractor payments or Form 1099-MISC for certain other amounts.

If a payee does not provide a valid W-9 with a correct TIN, the payer is required to withhold 24% of each payment as backup withholding and send it to the IRS. That 24% comes out of what would otherwise go to the contractor, and recovering it takes time. Collecting a completed W-9 upfront is how businesses avoid that obligation.

The current production form is Form W-9 (Rev. March 2024). The IRS has published a June 2026 draft form at irs.gov/DraftForms, but that document is explicitly marked "DRAFT — NOT FOR FILING." Until the IRS posts a final replacement at irs.gov/FormW9, the March 2024 version is the form businesses should continue to use. The draft is useful as advance notice of what the next revision will likely contain, and this post treats it that way.

The reporting threshold rises from $600 to $2,000

This is the change that affects the widest group of businesses, and unlike the form redesign, it is already enacted and in effect.

The One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025), specifically Section 70433, raises the threshold for information reporting under Internal Revenue Code Sections 6041 and 6041A from $600 to $2,000. The change applies to payments made after December 31, 2025, which means it is already in effect for the 2026 tax year.

In practical terms: a business that pays a contractor $1,800 during 2026 is no longer required to file Form 1099-NEC for that payment. The same threshold applies to Form 1099-MISC for most miscellaneous income payments. The $600 threshold that had been in place since 1954 was never adjusted for inflation. Section 70433 finally moved it.

Section 70433 also amends Section 3406(b)(6) of the Internal Revenue Code, which coordinates that specific backup withholding trigger with the Section 6041 reporting threshold. This means the Section 3406(b)(6) backup withholding trigger now applies at $2,000 for covered payment categories, not $600. However, other backup withholding triggers under Section 3406 remain unchanged. Backup withholding can still be required when a payee fails to provide any TIN, when the IRS notifies the payer of a TIN mismatch, or in other situations governed by separate provisions. The $2,000 change is targeted at the specific threshold coordinated with the Section 6041 reporting rules, not the entire backup withholding system.

The $2,000 threshold is indexed for inflation beginning in 2027. The IRS will publish the adjusted amount annually at IRS.gov/InflationAdjustment.

What this does not change: The new threshold applies to payments covered by Sections 6041 and 6041A, which includes 1099-NEC and most 1099-MISC payments. It does not affect every information return. Forms 1099-INT and 1099-DIV retain their $10 thresholds. Form 1099-S keeps its $600 threshold. Form 1099-B has no minimum. Any payment that falls under a different Code section should be checked against that section's own rules before assuming the $2,000 threshold applies.

The change is also federal only. States set their own information reporting thresholds and several have not adopted the federal increase. Businesses filing state returns should confirm each state's current threshold separately rather than assuming alignment with the new federal figure.

The practical point on W-9 collection: Even though fewer payments now cross the $2,000 threshold, it is still standard practice to collect a W-9 from every new contractor before the first payment, regardless of the expected total. Payments to the same vendor accumulate across the year. Collecting the W-9 at onboarding means you never have to scramble for it after the fact if the threshold is later crossed.

Proposed in the draft: A new line 3b for certain partnerships with foreign members

This change appears in the IRS's draft June 2026 Form W-9. It is not yet on the current March 2024 production form, but it is worth understanding now so you can assess whether it will affect your onboarding process when it is finalized.

The draft adds a new line 3b with a checkbox. But it applies to a narrow and specific population, not to all entities completing a W-9.

Three conditions must all be true before line 3b is relevant. First, the entity completing the W-9 must be a partnership, LLC taxed as a partnership, trust, or estate, as shown on line 3a. Second, the entity must be providing the W-9 to another flow-through entity (a partnership, trust, or estate) in which it holds an ownership interest, not to an ordinary customer or vendor for a service payment. Third, the entity completing the W-9 must have foreign partners, owners, or beneficiaries.

All three must apply simultaneously. A domestic two-founder LLC with no foreign members sending a W-9 to a corporate client for a services invoice does not satisfy any of these conditions and does not need to engage with line 3b at all. The mechanism is specifically designed to surface indirect foreign ownership inside tiered flow-through structures, where one US partnership that has foreign partners invests in another US partnership. The downstream entity uses that disclosure to assess whether Schedules K-2 and K-3 reporting obligations apply.

The draft also clarifies the existing line 3a rule for disregarded entities. A single-member LLC that has not elected corporate tax treatment should complete line 3a using its owner's tax classification, not the LLC's own classification. The disregarded entity's name goes on line 2 and the owner's name goes on line 1. This rule is not new, but the draft makes it more explicit.

When the IRS finalizes the form, businesses that work with partnership-structured vendors invested in other flow-through entities should add a conditional line 3b review step to their onboarding process. Most businesses that collect W-9s from individual contractors, corporations, or standard LLCs will not need to add any new step.

Proposed in the draft: A new digital asset broker certification checkbox

The draft adds a new checkbox to Part II (the Certification section) of Form W-9 for a narrow class of businesses: US digital asset brokers. This does not affect most companies collecting W-9s from contractors.

Final regulations under Treasury Decision 10000, published July 9, 2024, added a new category of exempt payee specifically for US digital asset brokers that effect sales of digital assets such as cryptocurrency on behalf of customers. The new checkbox in the draft's Part II allows a broker to certify to another broker that it qualifies as a US digital asset broker exempt from information reporting under Regulations Section 1.6045-1(c)(3)(i)(B)(12).

The mechanism this solves is the multiple broker rule. When more than one broker participates in a digital asset sale, the reporting obligation falls on the first broker that pays proceeds or credits the customer's account. The second broker does not need to file a duplicate information return if it receives a certification on Form W-9 that the first broker is a qualifying US digital asset broker. Before this draft change, the then-current W-9 lacked a field for that certification, so the transitional rules permitted a written statement instead. The new checkbox formalizes that process on the form itself.

On backup withholding relief timelines, the picture across 2025 through 2027 is as follows. For 2025 and 2026, Notice 2025-33 confirms broad backup withholding relief for digital asset sales effected by brokers, meaning backup withholding is not required for those transactions in those years. For 2027, the relief is conditional rather than blanket. It depends on specific factors including whether the customer held a preexisting account before January 1, 2026, the customer's address classification, and whether the broker uses the IRS TIN Matching program and receives a confirmed match. Describing 2027 as a simple extension of 2026 relief would be imprecise. After 2027, further guidance governs.

If your business is not a digital asset broker, the new checkbox has no bearing on your W-9 collection process.

What does not change

A few things are stable and worth confirming clearly.

The current production form is still Form W-9 (Rev. March 2024). Until the IRS posts a final replacement, that is the form to collect and the form to distribute to requesters. Do not distribute the draft June 2026 form as a production document or instruct vendors to complete it.

The backup withholding rate stays at 24%. This is confirmed in the current IRS backup withholding guidance and remains unchanged by any 2026 development.

The basic purpose and mechanics of Form W-9 are the same. A payee provides their name, TIN, and tax classification. The payer uses that information to file information returns. The form still requires a signature under penalties of perjury.

The rules for foreign persons are unchanged. Foreign individuals and entities should not complete Form W-9. They complete the appropriate W-8 series form or Form 8233 to establish foreign status and claim treaty benefits where applicable.

A practical checklist for founders and finance teams

Given the mix of enacted law and proposed form changes, here is a clear action list:

Implement the $2,000 threshold now: This is enacted law. Update your accounts payable and 1099 processes to reflect that payments under Sections 6041 and 6041A are reportable at $2,000 for the 2026 tax year. Remember that other backup withholding triggers still apply regardless of payment amount, and state thresholds may differ.

Keep collecting W-9s at vendor onboarding regardless of expected payment size: The threshold does not eliminate the value of a W-9 at onboarding. Annual payments accumulate and the threshold can be crossed without notice mid-year.

Continue using the March 2024 form until the IRS publishes a final replacement: Monitor irs.gov/FormW9 for the final version. When it is published, update any vendor portals, onboarding templates, or saved form copies to use the new version.

If your entity is a partnership with foreign partners, prepare for line 3b when the form is finalized: When you complete a W-9 on behalf of a partnership that has foreign partners and you are providing it to a flow-through entity in which the partnership has an interest, line 3b will need to be checked. This has implications for K-2 and K-3 reporting on your own Form 1065.

For digital asset brokers only: assess the new Part II certification checkbox against your broker role and the applicable transaction-year relief conditions when the form is finalized. This is a broker-to-broker certification mechanism, not a general vendor compliance field.

How Inkle helps

Staying current with reporting thresholds, form revisions, and compliance calendar changes is part of what Inkle's tax and bookkeeping team handles for US startups. When rules change, the impact flows into vendor onboarding, 1099 filing season, and year-end reconciliation. Inkle ensures that the books reflect the right data, the right forms are used, and the filings are accurate.

Learn more about Inkle's 1099 and tax services.

Frequently asked questions

Do I still need to collect a W-9 from contractors I pay less than $2,000 per year? 

Yes, it is still best practice to collect a W-9 from every contractor before the first payment regardless of expected amount. Payments accumulate across the year and the $2,000 threshold can be crossed faster than expected. Collecting the form at onboarding eliminates the need to request it retroactively if the threshold is crossed later.

What is the $2,000 threshold change and when does it apply? 

Section 70433 of the One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) raises the information reporting threshold from $600 to $2,000 for payments covered by Sections 6041 and 6041A of the Internal Revenue Code. The change also amends Section 3406(b)(6) to coordinate that specific backup withholding trigger with the revised threshold. It applies to payments made after December 31, 2025. Other backup withholding triggers under Section 3406 are unchanged.

Should I start using the June 2026 Form W-9 now? 

No. The June 2026 Form W-9 is an early-release draft published at irs.gov/DraftForms and is explicitly marked "DRAFT — NOT FOR FILING." The current production form remains Form W-9 (Rev. March 2024). Continue using the March 2024 version until the IRS posts a finalized replacement at irs.gov/FormW9.

What is the new line 3b on the draft Form W-9 and who needs to fill it in? 

Line 3b is a checkbox in the draft June 2026 form that applies only when three conditions are all met: the entity completing the W-9 is a partnership, LLC taxed as a partnership, trust, or estate; it is providing the form to a flow-through entity in which it holds an ownership interest; and it has foreign partners, owners, or beneficiaries. Most businesses collecting W-9s from individual contractors or corporate vendors will never need to engage with line 3b.

Does the backup withholding rate change in 2026? 

No. The backup withholding rate remains 24%. What changed is one specific trigger threshold under Section 3406(b)(6): it now coordinates with the $2,000 amount under Section 6041 rather than $600. Other backup withholding triggers such as missing TIN or IRS notification of a mismatch are unchanged.