Reading between the lines: Form W-9 draft is out

The IRS has released a draft of the 2025 Form W-9, and while much of the form remains familiar, there are some important updates that taxpayers, especially sole proprietors, single-member LLCs and digital asset brokers, should understand. The changes touch on identity reporting, exempt recipients and the IRS’s ongoing effort to keep up with a rapidly changing financial landscape.

The Form W-9, Request for Taxpayer Identification Number and Certification, is the taxpayer identification form businesses use to request the correct taxpayer identification number (TIN) from vendors, contractors, and other payees. It’s the form that makes sure payments are reported to the IRS to the correct individual or entity. Even small changes to this form can have ripple effects across tax compliance, payroll departments and financial reporting.

What’s the change?

One of the biggest points of clarification in the draft is directed at sole proprietors. In prior years, some sole proprietors would furnish either their Social Security number (SSN) or an employer identification number (EIN). The draft form, however, removes this flexibility. It now explicitly requires sole proprietors to provide their SSN.

This might sound minor, but it’s actually a significant shift. Many sole proprietors obtain EINs precisely to avoid sharing their personal SSN with clients or vendors. The EIN served as a layer of privacy and sometimes professionalism. The IRS is now making clear that, for W-9, purposes, the SSN is the identifier that must be used.

NOTE: The draft clarifies rules for disregarded entities, such as single-member LLCs. These entities cannot report their own EIN; they must report the owner’s TIN. If the owner is an individual, that usually means their SSN. Only if the owner is another business can an EIN be used.

This push toward SSNs may stem from the IRS’s current resource limitations. With budget cuts and a smaller workforce, the agency has been pressured to streamline enforcement and reduce errors. Having sole proprietors consistently use SSNs instead of EINs simplifies the IRS’s matching process between payers, recipients, and filed tax returns. It may cut down on mismatches where an EIN doesn’t align neatly with an individual’s Form 1040, U.S. Individual Income Tax Return.

Line 1 instructions have not changed

Curiously, the instructions on Line 1 of the draft W-9, the section where taxpayers enter their name, appear unchanged from the 2024 version. Line 1 continues to tell filers to enter the name shown on their tax return. For individuals, that means their personal name. For businesses, that means the legal business name.

The consistency here may cause some confusion. Taxpayers familiar with the 2024 W-9 might assume they can still use their sole proprietorship EIN, since the Line 1 instructions do not spell out the new SSN-only requirement. However, the more detailed guidance in the draft clarifies that the IRS wants SSNs for sole proprietors and disregarded entities tied to individual owners.

In other words, don’t be misled by the unchanged language on Line 1. The important change is in the TIN guidance: sole proprietors must use SSNs.

New category for digital assets brokers

Another notable update is the addition of a new category of exempt recipients in Part II of the W-9, related to digital asset (DA) brokers. The form now includes a checkbox for brokers to certify that they are U.S. digital asset brokers within the meaning of Regulations Section 1.6045-1(g)(4)(i)(A)(1) (other than a registered investment adviser).

This may sound technical, but the broader point is that the IRS is preparing for a new era of cryptocurrency and digital asset reporting. Beginning in 2025, brokers will be required to issue Form 1099-DA, Digital Asset Proceeds From Broker Transactions, to report sales and exchanges of digital assets. The update to Form W-9 helps align with that framework, ensuring that exempt digital asset brokers are properly identified.

The change underscores the IRS’s growing focus on cryptocurrency compliance. By baking digital asset reporting into the familiar W-9 process, the IRS signals that crypto is no longer in a gray zone. It’s treated like any other asset class with reporting and compliance obligations.

What to watch for

The draft 2025 Form W-9 introduces targeted but important updates. Sole proprietors should prepare to use their SSNs instead of EINs, while single-member LLCs must use their owner’s TIN. Digital asset brokers should take note of the new exempt-recipient checkbox. Everyone should remember that unchanged Line 1 (W-9) instructions don’t override the new SSN requirements.

While the IRS hasn’t explained the reasoning behind these specific changes, the likely driver is efficiency. By requiring SSNs, the IRS reduces mismatches in its systems. The agency acknowledges a market that has grown too large to ignore by addressing digital assets.