Forms W-8 are used to establish the payee’s foreign status of income tax withholding purpose. Form W-9 is used for requested for Taxpayer Identification Number for reporting an information return the amount paid. This article will discuss details about these two types of forms.
Forms W-8
The W-8 series forms are is tax forms specifically for non-resident aliens and foreign businesses who either work or earn income in the U.S. The U.S. citizen and resident alien are not required to fill out W-8 forms. The W-8 forms certify your foreign status and inform the payors or withholding agents that you will be taxed differently than a resident.
Generally, foreigners are ordinarily subject to 30% withholding tax on the income you receive from U.S. sources, including dividends, rents, royalties, premiums, annuities and other fixed or determinable annual or periodical gains, profits, or income. The W-8 series forms can help you claim a reduced withholding tax rate or an exemption if your home country has a tax treaty with the U.S.
Foreign persons must provide proper Form W-8 to the withholding agent or payer if they are the beneficial owner of the income subject to the tax withholding. You must submit the form prior to receiving income or credits from them regardless of whether you are claiming a reduced withholding. If you do not provide the form W-8, the withholding agent may have to withhold at the 30% rate, or the 24% backup withholding rate under section 3406.
There are five types of Forms W-8
W-8 BEN: Foreign individual to claim foreign status or treaty benefits.
W-8BEN-E: Foreign entities to claim foreign status or treaty benefits.
W-8ECI: Foreign individual to confirm that all income listed on the form is effectively connected with a US business or trade (ECI).
W-8EXP: Certain foreign entities to claim a reduction or an exemption from tax withholding.
W-8IMY: The purpose of the form is to certify that a person or business received withholdable payments on behalf of a foreigner or as a flow-through entity.
Form W-9
A W-9 form is an information return that used to confirm a U.S. individual or entity’s name, address, and taxpayer identification number for employment or other income-generating purposes.
The information taken from a W-9 form is often used to generate a 1099 tax form, which is required for income tax filing purposes. A 1099 form contains information about any income that may have been received by the tax identification number holder that would not normally be listed on a W-2 form. This includes, but is not limited to, income paid to a person as part of a contract; certain real estate transactions; dividends paid against an investment; and various other financial transactions.
The information collected by an entity on a W-9 form cannot be disclosed for any other purpose, under strict privacy regulations.
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
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