Email Signature Form W-8BEN Made Easy

Editable form 56

today we're going to talk about IRS Form w8 then certificate of foreign status of beneficial owner for United States withholding and reporting for individuals the primary purpose of Form w8 been is to establish that an individual is a foreign person that is not a u.s. person it is a relatively short form only one page long although the primary purpose of the form is to certify the foreign status of the individual the form can also be used to claim treaty benefits in part to w8 Ben should only be used for individuals and not for entities entities must fill out w8 Ben II as shown here and as shown here the term beneficial owner essentially means the owner of the income being received and that that person is not a nominee or an intermediary the terminology can get a little confusing because the person making the payment usually has a deductible expense and does not have income however it is income to the foreign recipient or the foreign beneficial owner the u.s. imposes a 30 percent withholding tax on certain types of payments of US sourced income to foreign persons the payor of the income is obligated to withhold u.s. tax unless an exception applies the payor is referred to as a withholding agent because the payor may need to withhold u.s. tax the typical types of income that are subject to the withholding tax include dividends interest rents royalties and compensation for services however it is important to remember that it is only us source income that is subject to the 30% withholding tax in particular with regard to services if the payment is being made for services that take place entirely outside the US then the income is not considered us source income and the 30% withholding tax simply does not apply however it gets much more complicated if any of the services are performed in the US these withholding rules can get a little tricky however because you may be making a payment to an individual outside the US that happens to be a US citizen for payments to u.s. citizens you are typically required to send them a 1099 reporting the payment to the IRS in that case you ask the recipient for a form w-9 and forum w8 and then on the form w-9 they certify that they are a u.s. person and they provide their US taxpayer identification number so that you can file the form 1099 payments to US persons can be subject to a 28 percent backup withholding if they don't provide their US taxpayer identification numbers so it is important to understand that payments to US persons and payments to non-us persons can both be subject to potential withholding tax so how do you determine if an individual is a foreign person well you ask them to fill out a form w8 Ben where they sign certifying at the bottom they certify that they are not a US person if a person files form w8 Ben's certifying that they're not a US person and the circumstances change then the beneficial owner needs to notify the withholding agent within 30 days of the change in circumstances for example if the beneficial owner moves to the United States and becomes a u.s. resident the beneficial owner should then provide at w9 to the withholding agent in addition if the w8 been was used to claim treaty benefits and the beneficial owner moves to a different country that would be a change in circumstances that requires a new form w8 Bend to be completed generally at form w8 Ben is good for three years and then it must be refreshed it used to be that in order to claim treaty benefits the foreign beneficial owner had to get a US taxpayer identification number however that has now been changed and the beneficial owner only needs to provide their foreign taxpayer identification number in order to claim treaty benefits treaty benefits are usually claimed to reduce or eliminate the u.s. withholding tax on dividends interest rents or royalties but there are other circumstances that can be used to claim treaty benefits as well the form w8 then is provided by the beneficial owner to the withholding agent and that withholding agent does not file it with the IRS instead the withholding agent keeps the w8 then on file in case the IRS ever audits them and asks for the form one last thing that sometimes confuses people is the certification that the income is not effectively connected with the trade or business in the United States this type of income is often referred to as ECI for effectively connected income just because the payor or withholding agent be doing business in the u.s. does not mean that the recipient that is the beneficial owner is doing business in the US some types of payments of foreign source income can be effectively connected income however payments for services that take place outside the US or foreign source income and those types of payments cannot be effectively connected income it is important to note that personal services income is sourced where the services are performed without regard to the location of the payor the residence of the taxpayer the place of contracting or the place of payment so that is a summary of IRS Form w8 Ben I hope you enjoyed the video