W-8BEN: When to Use It and Other Types of W-8 Tax Forms

March 22nd, 2024

In lieu of the certifications contained in Parts IV through XXVIII of Form W-8BEN-E, in certain cases you may provide an alternate certification to a withholding agent. An FFI in a Model 2 IGA jurisdiction that has entered into an FFI agreement with respect to a branch is a participating FFI but may be referred to as a reporting Model 2 FFI. If, on the other hand, you have more income withheld than you should, you will receive a refund after you file your annual income tax return. Receiving a refund isn’t necessarily a good thing—it represents money you could have used throughout the year to pay your bills or invest for your future financial well-being. A withholding allowance is an exemption that reduces how much income tax an employer deducts from an employee’s paycheck and transmits to the IRS on their behalf.

If you do not provide this form, the withholding agent may have to withhold at the 30% rate (under chapters 3 and 4), backup withholding rate, or the rate applicable under section 1446. If you receive more than one type of income from a single withholding agent for which you claim different benefits, the withholding agent may, at its option, require you to submit a Form W-8BEN for each different type of income. Generally, a separate Form W-8BEN must be given to each withholding agent.

Everything You Need to Know About W8 Forms

Crucially, ECI is not subject to the same 30% withholding that applies to interest, rents, and other nonbusiness income. Instead, after subtracting applicable deductions, it is taxed at the graduated rate that U.S. citizens and resident aliens pay. If your work is covered by a U.S. treaty, it would be taxed at the lowest rate under that treaty. Form W-8BEN is used by foreign individuals who receive nonbusiness income in the U.S., whereas W-8BEN-E is used by foreign entities who receive this type of income. The version of the form used is determined by both whether or not the filer is an individual or a business and the nature of the income the filer received.

A transfer is a sale, exchange, or other disposition of a partnership interest, and includes a distribution from a partnership to a partner, as well as a transfer treated as a sale or exchange under section 707(a)(2)(B). A participating payee means any person that accepts a payment card as payment or accepts payment from a third party settlement organization in settlement of a third party network transaction for purposes of section 6050W. Ensuring that the right amount of money is withheld from each paycheck to pay federal income taxes is important.

Form W-8IMY

Generally, a payment to a U.S. branch of a foreign person is a payment to a foreign person. Foreign partnerships, foreign simple trusts, and foreign grantor trusts are not the beneficial owners of income paid to the partnership or trust. The beneficial owners of income paid to a foreign partnership are generally the partners in the partnership, provided that the partner is not itself a partnership, foreign simple or grantor trust, nominee or other agent. The beneficial owners of income paid to a foreign simple trust (that is, a foreign trust that is described in section 651(a)) are generally the beneficiaries of the trust, if the beneficiary is not a foreign partnership, foreign simple or grantor trust, nominee, or other agent. The beneficial owners of income paid to a foreign grantor trust (that is, a foreign trust to the extent that all or a portion of the income of the trust is treated as owned by the grantor or another person under sections 671 through 679) are the persons treated as the owners of the trust.

Generally, only a nonresident alien individual can use the terms of a tax treaty to reduce or eliminate U.S. tax on certain types of income. However, most tax treaties contain a provision known as a “saving clause” which preserves or “saves” the right of each country to tax its own residents as if no tax treaty existed. Exceptions specified in the saving clause may permit an exemption from tax to continue for certain types of income even after the recipient has otherwise become a U.S. resident alien for tax purposes.

What Is IRS Form W-8?

Generally, a separate Form W-8BEN-E must be given to each withholding agent. When subject to withholding of U.S. taxes, the single owner of a disregarded entity, NRA-classified what is a w8 account holder of a foreign financial institution (FFI), and the non-U.S. Transferor of an interest in a partnership for a connected gain are also required to file Form W-BEN.

• 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.
• The last form on our list (Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting) is only used by intermediaries, flow-through entities, and certain U.S. branches.
• For chapter 4 purposes, a change in circumstances generally occurs when there is a change in a person’s chapter 4 status.
• But it’s used when the payee is an entity, such as a trust or corporation, rather than an individual.

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