Tax-Expatriation

FATCA Driven – New IRS Forms W-8BEN versus W-8BEN-E versus W-9 (etc. etc.) for USCs and LPRs Overseas – It’s All About Information and More Information

Posted on June 30, 2014

FATCA Driven – New IRS Forms W-8BEN versus W-8BEN-E  versus W-9 (etc. etc.) for USCs and LPRs Overseas- It’s All About Information and More Information

An earlier post explained why U.S. citizens (and some LPRs) cannot sign the new IRS Form W-8BEN.  See, IRS Releases New IRS Form W8-BEN. * U.S. citizens and LPRs beware of completing such form at the request of a third party.

IRS Forms, W-8, W-9, W-8BEN-E, W-7, W-8IMY, W-4,  W-8ECI, W-8EXP are a confusing alphabet soup of IRS forms.  They have become more difficult to understand now because of the intricacies of the law of FATCA.  See, The Importance of a Certificate of Loss of Nationality (“CLN”) and FATCA – Foreign Account Tax Compliance Act.

In short, these forms are designed to “track taxpayers”; their assets and their accounts.  The forms track and identify USCs who are individuals and if they are “substantial owners” (basically 10%) in various foreign entities; explained more below.

U.S. tax lingo means that a “taxpayer identification number” (TIN) is a broad definition and can also include all of the following, which are TINs –

1.  “Social Security Number” (SSN) in the case of certain individuals (USCs, LPRs and those who have permission to work in the U.S. under a particular visa);
2. “Individual Taxpayer Identification Numbers” (ITIN) in the case of other individuals who are not USCs or LPRs and not otherwise eligible for a SSN (another post will explain how ITINs are obtained);
3. Employer identification numbers (EINs) for certain entities, such as corporations, partnerships and trusts.

Hence, an SSN, ITIN, EIN are all TINs, depending upon which context they are being used.

My earlier post warns U.S. citizens NOT to sign IRS Form W-8BEN, because such certification would be false.  –  Importantly, no U.S. citizen can legally sign and certify they are NOT a “U.S. person” under U.S. federal tax law.  Hence, they cannot sign and complete IRS Form W-8BEN. –

Individual U.S. citizens should normally be signing IRS Form W-9, or the substitute form provided by the financial institution when asked for their U.S. taxpayer status.  Banks and other third parties can have their own substitute returns that comply with the regulations.  Hence, the form might not look exactly like the official IRS forms reflected here.

The IRS Form W-9 is to request the U.S. taxpayer identification number of a U.S. citizen and LPR (or a TIN for a U.S. company – or other company).  The IRS version is reflected herein.  See, The Catch 22 of Opening a Bank Account in Your Own Country – for USCs and LPRs.

Why is all of this important, now with FATCA in effect and operational throughout the world?

There is greater focus on information that will be provided to foreign financial institutions (FFIs) around the world as they collect and track data on their account holders.

In the case of USC (and many – if not most LPRs) individuals residing overseas, they will NOT be able to sign an IRS Form W-8, as explained above and in the prior posts – such as  IRS Releases New IRS Form W8-BEN. * U.S. citizens and LPRs beware of completing such form at the request of a third party.

However, if a USC (and/or LPR) is a shareholder, partner or other economic owner in a non-U.S. foreign entity (such as a corporation, certain other type of companies, certain “partnership”  and “trusts” – which can be known as a non-financial foreign entity – “NFFE”), the entity itself will be required to identify the “substantial U.S. owners” of the NFFE.  Sounds complicated?  It is very complicated.

See the key provisions of the IRS Form W-8-BEN-E highlighted in this post that reflects some of these multiple categories.  This form requires the person completing it to frankly understand the FATCA regulations (some 450+ pages worth – including preamble) and properly categorize the type of entity/taxpayer in some 30+/- different categories.  That is why the Form W-8BEN-E is some 8 pages in length.

Worse, for the person signing it; they must certify under penalty of perjury that it is complete and accurate.  There will undoubtedly be numerous good faith errors by those who attempt to complete these new forms.  Indeed, the new IRS Form W-8IMY has not even been addressed in this post, which is another form that was substantially modified due to the FATCA regulations.

If this summary has not cleared up the confusion for you;  don’t worry, you are not alone!

I will try to continue to provided key summary explanations of these rules during the course of the next few months, as persons need to understand how to complete and implement properly these IRS Forms or the substitute forms provided by various FFIs throughout the world; now including China and Hong Kong!

It is during these next few months (prior to 31 December 2014) that this topic will be of great interest as FFIs around the world request this information from their account holders; not just USCs or LPRs.  See, HUGE NEWS – China has “Reached an Agreement in Substance” for a FATCA Intergovernmental Agreement (IGA) – its Affect on USCs and LPRs Living in China and Hong Kong