Taxes

What is a W-8 Form?

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If you’re a US citizen wondering why you’ve never heard of form W-8, it’s really no wonder at all. Form W-8 is filled out by foreign entities (citizens and corporations) to claim exempt status from certain tax withholdings. The form is used to declare an entity’s status as a non-resident alien or foreign national who works outside of the United States. The benefit is that these individuals receive a certain tax treaty status that affords them certain rights, such as lower withholdings from dividends paid by US corporations.

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There are many different types of W-8 forms. These forms are typically requested by withholding agents, usually firms or brokers, and not the IRS. For example, brokers typically request Form W-8BEN from foreign nationals. This form is used to lower withholdings from dividends and other types of income. Form W-8ECI is used by a foreign person to certify income associated with trade or business within the United States. (This is slightly different from Form W-8BEN, which certifies allocated funds, such as dividends from stocks and mutual funds.) Form W-8EXP is filled out by foreign governments, international organizations, banks of issue, tax-exempt organizations, private foundations, and governments of US possessions. Form W-8IMY is for a person or a business who received payments on behalf of a foreigner. In other words, nothing the typical tax-payer needs to be concerned about.

A withholding agent will typically request Form W-8BEN from any foreign client. If you are a foreign investor, filling out this form may significantly lower your tax withholdings. A withholding agent must generally withhold 30% of the income distributed to a foreign national unless the national can be associated with tax treaty status via a Form W-8.

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Form W-BEN requires some pretty typical information: name, taxpayer identification, country of origin, etc. You’ll also need to provide a statement describing the national principal contracts the income is associated with. Writing and updating this statement can get complicated. When in doubt, discuss any questions with a certified tax professional.

Form W-8ECI is another form that will help you lower your withholding if you are a foreign national in a partnership that conducts trade or business within the United States. Like Form W-8BEN, this form will require typical identification information, along with a description of the nature of the expected income.

The last W-8 that a typical, non-corporate taxpayer might need to know about is Form W-8CE. This form is used to certify that a taxpayer is a covered expatriate, and subject to special tax rules. If you are a recently expatriated citizen waiting on differed compensation after your date of expatriation, you’ll want to fill out Form W-8CE within 30 days after you expatriate. The form must be filed for each tax-deferred account, item of deferred compensation, or interest in a non-grantor trust.

One thing is certain: W-8 forms are not the sort of simple tax form the average payer can easily navigate. If you’re one of the few taxpayers required by the IRS to fill out Forms W-8, you would be well-served to consult a professional. If you need help filing your taxes this year, you may want to consider both Turbo Tax and H&R Block. Their free online tax software can make your tax nightmares disappear.

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Rob Berger

Rob Berger

Rob Berger is the founder of Dough Roller and the Dough Roller Money Podcast. A former securities law attorney and Forbes deputy editor, Rob is the author of the book Retire Before Mom and Dad. He educates independent investors on his YouTube channel and at RobBerger.com.


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