Relying on Previous Certifications: Opening More Than One Account at Once

In general, a payor is permitted to rely on certifications of the correctness of a TIN and that the payee is not subject to backup withholding until the payor is notified to the contrary by the IRS. [26 CFR 31.3406(h)-3(e)(2)(v)] (See our earlier section on unreliable certifications, however.) This means that if you are opening an account for a payee who already has accounts with you for which the payee has made the necessary certifications, you do not need to obtain new certifications if the IRS has not notified you that the payee supplied an incorrect number or that the payee is subject to backup withholding.

You do need to be sure you haven’t been notified, however. The IRS regulations say the following:

If…in opening a new account, the payor relies on the same Form W-9 (or appropriate substitute) that it relied on previously in opening another account, the payor must investigate whether any such existing account is subject to withholding under section 3406(a)(1)(C) [payee underreporting]. Similarly, if the payor utilizes a universal account system…and in opening a new account the payor searches its records to determine whether the new account should be identified under an existing identifier (because the payee has existing accounts with the payor), the payor must investigate whether any existing accounts identified with the same identifier are subject to withholding under section 3406(a)(1)(C) [payee underreporting]. [26 CFR § 31.3406(c)-1(c)(3)(iii)(C)]

If a payee is opening several accounts with you at the same time, you are only required to obtain one set of certifications, and that set will apply to all the accounts opened by the payee.

However, while you are not required to have separate certifications for each account, you are permitted to require the payee to supply you with separate certifications for each account if you want. [26 CFR 31.3406(h)-3(a)(2)] You should do whatever is most convenient for you. For example, if a payee has a previous account with you, but it is more convenient for you to take new certifications than to check your records to see if the payee has previously supplied certifications, you should require new certifications. You should always check your records, however, to be sure you haven’t received notice from the IRS of incorrect TIN or payee underreporting with respect to the payee. See our later chapter on ongoing backup withholding duties for details on how you should respond to such a notice.