IRS Form W-9 (2026 Draft): An Update for Digital Asset Compliance

IRS Form W-9 (2026 Draft): An Update for Digital Asset Compliance

The IRS’s draft of Form W-9, scheduled for release in January 2026, introduces significant changes that reflect the broader effort to bring digital asset transactions into the traditional tax compliance framework. These updates are not just procedural, they are foundational to the IRS’s enforcement of new reporting obligations under Form 1099-DA, which will be used to report digital asset sales beginning with the 2025 tax year.

Key Changes in the 2026 W-9 Draft

The most notable updates include a new checkbox for U.S. digital asset brokers to certify exemption from information reporting under Regulation §1.6045-1, and a new exempt payee code (Code 14) that allows certain brokers to claim exemption from backup withholding on digital asset transactions through 2026. These additions are designed to align Form W-9 with the IRS’s new digital asset reporting regime and ensure that brokers can properly document their exemption status.

Additionally, the draft clarifies that sole proprietors must provide their Social Security Number (SSN), not an Employer Identification Number (EIN), and that disregarded entities must use the TIN of the underlying owner. These clarifications are intended to reduce mismatches and IRS B-Notices, which can result in penalties and backup withholding.

The Broader Regulatory Context: Form 1099-DA and Section 6045

These changes are part of a larger regulatory framework stemming from the Infrastructure Investment and Jobs Act (IIJA) and finalized IRS regulations under Section 6045. Beginning in 2025, custodial brokers; including crypto exchanges, wallet providers, and payment processors, must report gross proceeds from digital asset sales on Form 1099-DA. In 2026, they will also be required to report cost basis for covered digital assets.

To complement these reporting obligations, Section 3406 imposes backup withholding requirements when a customer fails to provide a certified TIN or when the TIN/name combination does not match IRS records. This makes the accurate collection and validation of TINs a critical compliance function for digital asset brokers.

Transition Relief: TIN Collection and Matching Rules

Recognizing the operational challenges brokers face in implementing these new requirements, the IRS has issued Notice 2025-33, which extends and modifies the transitional relief originally provided in Notice 2024-56. This relief is particularly important for brokers who are still building out their systems for TIN collection, validation, and backup withholding.

Key Provisions of the Transition Relief

No Backup Withholding in 2025 or 2026
Brokers are not required to perform backup withholding on digital asset sales during calendar years 2025 and 2026, even if a certified TIN is not collected.

TIN Matching as a Substitute for Certified TINs in 2027
For accounts opened before January 1, 2026, brokers may rely on the IRS’s TIN Matching Program instead of collecting a certified W-9. If the broker submits the customer’s name and TIN to the IRS and receives a match, they are not required to perform backup withholding on digital asset sales in 2027.

Relief for Value-Based Withholding
If a broker withholds digital assets instead of cash and the value of those assets drops before liquidation, the IRS will not penalize the broker as long as the assets are promptly liquidated.

Exempt Foreign Person Classification
Brokers may treat certain pre-2026 customers as exempt foreign persons through 2027 if they have a non-U.S. address and have not previously been classified as U.S. persons.

This phased approach gives brokers time to implement robust TIN collection and validation systems while avoiding penalties during the transition period. This also has caused confusion with regards to the changes made on the W-9 form. Why roll out these stipulations now when there is transition relief provided?

What Brokers Should Do Now

Digital asset brokers should begin preparing immediately by:

• Updating substitute W-9 forms to include the new checkbox and exemption code.

• Auditing existing customer records for TIN accuracy.

• Registering for the IRS TIN Matching Program.

• Implementing automated tools to manage TIN collection, validation, and reporting.

• Preparing for full Form 1099-DA compliance by 2027.

The IRS has made it clear that digital assets are now firmly within the scope of U.S. tax enforcement. However, by leveraging automation and aligning with vendor platforms like TAINA, brokers can turn regulatory complexity into a strategic advantage.

How TAINA Technology Supports Compliance

TAINA is uniquely positioned to help digital asset brokers navigate these changes. TAINA offers a fully automated solution for collecting and validating tax forms, including the updated W-9 once it is in final form. Additionally, the platform supports real-time TIN validation, including integration with the IRS TIN Matching Program, which is critical under the new transition rules.

TAINA’s system will also ensure that the new digital asset broker checkbox and exemption codes are properly captured and validated. This reduces the risk of mismatches, penalties, and backup withholding, while streamlining the onboarding process for customers.

We would love to talk to you more about your current documentation validation process and how our award-winning FATCA and CRS Validation platform may add value to your organisation.

For more information on how our fully automated FATCA and CRS Validation platform can add value to your business, get in touch or request a demo to see it in action.