Why Is My Bank Asking for a W-9 Form?
A W-9 request from your bank is a routine step for tax compliance. Learn why financial institutions need this form to fulfill their IRS reporting duties.
Receiving a request from your bank to fill out a tax form can be unexpected. This request is a standard part of a financial institution’s obligations, as banks and other financial entities are required by federal law to collect and verify certain customer information for tax reporting purposes. The form they send, an IRS Form W-9, is the mechanism they use to fulfill this requirement.
Understanding Form W-9
The IRS Form W-9 is officially titled “Request for Taxpayer Identification Number and Certification.” Its primary function is to allow a business or financial institution to formally request and obtain your correct Taxpayer Identification Number (TIN). The form is not filed with the IRS by the bank; instead, it is kept on file as a record of your certified information.
For most individuals, the required TIN is their Social Security Number (SSN). For business entities, such as partnerships or corporations, the TIN is their Employer Identification Number (EIN). The form asks you to provide your name, address, and TIN, and to certify under penalty of perjury that the number is correct and that you are not subject to backup withholding.
The Bank’s IRS Reporting Obligation
The core reason your bank needs a completed Form W-9 is tied directly to its legal duty to report certain income payments to the IRS. When a bank pays you interest, it is considered taxable income. Federal regulations require financial institutions to report these payments to both you and the IRS. This reporting is done using an information return, most commonly Form 1099-INT, Interest Income.
A bank must issue a Form 1099-INT if it pays you $10 or more in interest during a calendar year. This total includes not just the interest earned on your balance, but also any bonuses you might receive for opening an account, as the IRS considers these to be a form of interest income. To accurately complete the Form 1099-INT, the bank must include your correct TIN.
Common Reasons for the Request
While the underlying reason for a W-9 is tax reporting, the timing of the request is often triggered by specific events. One of the most common triggers is opening a new account. Banks often integrate the W-9 or a substitute version into their new account paperwork.
Another frequent reason is that an existing account has met a reporting threshold for the first time. You may have had a savings account for years, but if it never earned more than $10 in interest annually, the bank was not required to file a Form 1099-INT. If your balance increases and you earn more than that threshold, the bank must then secure your TIN to file the required form.
A bank will also send a W-9 request if it discovers the TIN on file is incorrect or missing. This can happen during an internal data audit or if the bank receives a notice from the IRS indicating a mismatch between the name and TIN they have on record. The bank will ask you to complete a new Form W-9 with the accurate information.
Backup Withholding Explained
If a bank does not have a certified TIN from you, it may be required to implement backup withholding. This rule requires the payer—in this case, the bank—to withhold a flat 24% from any reportable payments and send that money directly to the IRS.
It is not an additional tax or a penalty; rather, it is a prepayment of federal income tax that you will have to account for when you file your annual tax return. The amount withheld will be reported on your year-end Form 1099 and can be claimed as a tax payment on your Form 1040.
The primary way to prevent backup withholding is to ensure your bank has your correct TIN. By completing and returning the Form W-9, you certify your taxpayer information, which allows the bank to report your income correctly without needing to withhold taxes from your payments.