Who Needs to fill out Form W-8BEN-E? Accountancy Advice for UK Companies Operating in the US Employer of Record USA & Canada

Form W-8BEN will remain valid for at least three calendar years. A Form W-8BEN expires on the third complete calendar year after it is signed. For example, if you sign a W-8BEN on July 28, 2021, it will expire on December 31, 2025.

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The onus is on the client to ask you to complete and provide them with the form. The reason being, if the US client is ever audited, they may be asked why they did not withhold federal US tax when engaging with a foreign business. If you do not provide the appropriate W-8 form when expecting payment from your US client, they may withhold some of the overdue funds to pay tax on your behalf to the IRS. If you’re a non-US citizen and a non-US resident (known as a non-resident alien) who has earned money in the US, taxes can be that much more difficult. The FATCA form is a form that you are requested to fill out if there are indications of the possibility of applying taxes in the United States. The W8 and the BEN W8 are a set of American tax forms which certify your tax status in relation to the American authorities, the IRS.

• If you are a resident of a country with a tax treaty with the US, fill this section to claim your exemption from withholding tax.
• As mentioned earlier, the W-8BEN is the equivalent of the W-9 used for US persons.
• IRS Tax Treaty Tablesprovide a summary of many types of income that may be exempt or subject to a reduced rate of tax.
• A professional is often consulted to assist in completing them.
• The W-8BEN-E form is used for reporting to the IRS information about a non-U.S.
• The penalty for not filing on time could result in up to a 30% fine.

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However, it is best to reach out to experts who work with foreign businesses like Dyke Yaxley who can help walk you through the form step by step in relation to your exact business scenario. This includes help with the right language to use and which exact boxes to tick because it can be confusing. Residents in the US, those who hold a US Green Card, and those who spend most of their working year in the US are subject to US income tax. Therefore, if you are physically doing business in the US, your client has a responsibility to withhold federal withholding tax from the amount they paid you. The second type of income is for fixed or determinable annual or periodic income, known as FDAP. This includes passive income such as interest, dividends, rent, or royalties.

• Also, you shouldn’t complete form W-8BEN to outline personal service income.
• A tax preparer who is both an Enrolled Agent and a CPA very well aware of the tax situation of US citizens living abroad.
• It is important to note that the US has different tax treaties with different countries around the world, which means withholding amounts differ for freelancers depending on what country they reside in.
• The list of countries with relevant treaties is long and subject to change.
• This may include your name, address, and taxpayer identification number .