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Like the W-9 form, W-8 forms should not be submitted to the IRS. Instead, those who receive the payments, like freelancers and independent contractors, should submit them to you, the paying company, or withholding what is a w8 agents. If you’re a non-resident alien or foreign business who earned money in the US, read on to learn all about your W-8. The forms are submitted to the payer or withholding agent, and not the IRS.
The language is complex and often refers to terms most of us have never heard before. On top of that, the pressure of what may happen if you get something wrong can be overwhelming and even paralyzing. Longtime Fool specialistSelena Maranjian, whom you can follow https://www.bookstime.com/ on Twitter, has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
E-wallet or EMI accounts
Form W-8IMY is submitted generally by a payment recipient (the “filer”) with non-beneficial owner status, i.e. an intermediary. Such intermediary can be a U.S. branch, a qualified intermediary, a non-qualified intermediary, foreign partnership, foreign grantor or a foreign simple trust. All non-US persons and entities are required to complete an IRS Form W-8 to certify your country of tax residence and to establish whether you qualify for a reduced rate of withholding when opening an account. The type of W-8 form completed depends on the whether or not you open an individual account or an entity account. The W-8 form specifically is used by foreign entities, both citizens and organizations, for the purpose of gaining exemption from filling for particular tax withholdings. This form acts a proof of status that the company is conducting business within the US, however, it is primarily based in a foreign country.
It is also used by an individual to claim treaty benefits for royalty/passive income. Form W-8BEN is sent by the company making payments to the individual. The form should be returned to the company or entity that sent the form W-8BEN, not the IRS. Typically, the form should be submitted before the first payment is made. As with other W-8 forms, Form W-8EXP must be sent to the payer or withholding agent before income is paid to you. Not doing so could lead to a tax withholding at the 30% rate, a backup withholding rate, or the ECI tax rate. The Form W-8BEN and W-8BENE are forms used to confirm that your international freelancers/vendors are not U.S. taxpayers and that you are not required to withhold taxes from their earnings .
W-8 forms vs. W-9 forms
The US entity will pay you the amount of the invoice you sent and will simply report the information to the IRS. Tracking all foreign entities and all transactions would be a Herculean task for the US administration, so US officials have decided to delegate the process. If you have not heard about the W8 form yet, you may be surprised as you receive a laconic email from your clients (“Could you please send us the W8 form?”) with an 8-page document attached. If you are a non-US SMB that is selling services to US entities, these US entities will most likely ask you to fill out a W8 form.
Form W-8BEN-E is also titled “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting,” but it is filed by foreign entities, not individuals. The language of these forms can seem complex even for those who have experience with foreign bank banks, and any error can cause heavy sanctions, so it is we advise you to fill out these forms with the aid of an expert.
How do I fill out a W-8 BEN form?
UW policy states a new W-8BEN must be obtained for all Nonresident Alien payments made by the UW. Prior year W-8BEN forms cannot be used in subsequent years because Nonresident Alien statuses may change from year-to-year, and even during a calendar year. Withholding agents aren’t permitted by law to make payment to an individual or entity outside the U.S. without having one of these forms on file. Withholding agents are required to request Form W-8 from applicable payees. Tax withholding is required for most income earned in the U.S., regardless of whether the individual receiving that income is a U.S. citizen. Payers then forward this tax money to the federal government on behalf of the payee .
- If you’re submitting multiple W-8BEN forms to various requestors, keep a copy of each one with the name of the party listed and the date you sent it to them.
- If a U.S. employer pays foreign employees and contractors outside of the United States, a W-8BEN Form is a necessary tax requirement to certify their country of residence.
- If you’re filing directly through an IRS website, you cannot use an electronic signature, but some third-party processing agencies may accept them.
- These include foreign governments, foundations, and tax-exempt organizations, as well as governments of a U.S. possession or foreign central banks of issue.
- If your circumstances change during the three years, you can always submit a new form with your updated information.