W-8s for U.S. Citizens Abroad: Filing False Information with Non-U.S. Banks

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Individuals who do not specialize in U.S. federal tax law, often have little detailed understanding of the U.S. federal “Chapter 3” (long-standing law regarding withholding taxes on non-resident aliens and foreign corporations and foreign trusts) and “Chapter 4” (the relatively new withholding tax regime known as the “Foreign Account Tax irs-form-w-8ben-2006-older-version-with-certification-languageCompliance Act”) rules.

Indeed, plenty of U.S. tax law professionals (CPAs, tax attorneys and enrolled agents) do not understand well the interplay between these two different withholding regimes –

Plus, the IRS forms have been significantly modified over the years; with increasing factual representations that must be made by individuals who sign the forms under penalty of perjury.  They are complex and not well understood.  For instance, the older 2006 IRS Form W-8BEN for companies was one page in length and required relatively little information be provided.

The entire form is reproduced here; indicating how foreign taxpayer information was optional and generally there was no requirement to obtain a U.S. taxpayer identification number.  It was governed exclusively by Chapter 3 and the regulations that had been irs-form-1001-old-1998-versionextensively produced back in the early 2000s.

The forms were even easier before those regulations (see old IRS Form 1001).  No taxpayer identification numbers were ever required and virtually no supporting information regarding reduced tax treaty rates on U.S. sources of income.

Life was simple back then – compared to today!

The one thing all of these forms have in common is that all information was provided and certified under penalty of perjury.  Current day IRS Forms W-8s can typically be completed accurately by experts who understand the complex web of rules.  Plus, multiple versions of W-8s exist today; most running some 8+ pages in length.

See the potpourri of current day W-8 forms –

Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)

Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)

Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding

Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding

Making certifications under penalty of perjury are more complex, the more and more factual information that is being certified.  If I certify the dog I see in front of me is “white and black” that is not a complex certification, if I see the dog and see the “white and black”.  If the dog also has some brown coloring, my certification would necessarily not be false.W-8BEN - 2016 version..PNG

However, if I have to certify as to the colors of each dog in a pack of 8 dogs (and each and every color that each dog is/was), that becomes a much more complicated certification.

That’s my analogy for the old IRS Forms W-8s and the current day  IRS Forms W-8s.

Compare that form, of just 10 years ago, with what is required and must be certified to under current law.  It can be daunting.

Now to the rub.  Individuals who certify erroneously or falsely, can run a risk that the government asserts such signed certification was done intentionally.  I have seen it happen in real cases; even though the individual layperson (particularly those who speak little to no English and live outside the U.S.) typically has little understanding of these rules.  They typically sign the documents presented to them by the third party; usually the banks and other financial institutions.

The U.S. federal tax law has a specific crime, for making a false statement or signing a false tax return or other document – which is known as the perjury statute (IRC Section 7206(1)).  This is a criminal statute, not civil.  Some people are also under the misunderstanding that a false tax return needs to be filed.  The statute is much broader and includes “. . . any statement . . . or other document . . . “.

(1) Declaration under penalties of perjury

Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; or . . .

 

Therefore, if a U.S. citizen living overseas (or anywhere) signs IRS Form W-8BEN (or the bank’s substitute form, which requests the same basic information), that signature under penalty of perjury will necessarily be a false statement, as a matter of law.  Why?  By definition, the statute says a U.S. citizen is a “United States person” as that technical term is defined in IRC Section 7701(a)(30)(A).  Accordingly, IRS Form W-8BEN, must only be signed by an individual who is NOT a “United States person”; who necessarily cannot be a United States citizen.  To repeat, a United States citizen is included in the definition of a “United States person.”   Plus, the form itself, as highlighted at the beginning of the form, warns against any U.S. citizen signing such form. w-8ben-certification-portion-2016-version

Accordingly, if a U.S. citizen were to sign IRS Form W-8BEN which I have seen banks erroneously request of their clients, they run the risk that the U.S. federal government will argue that such signatures and filing of false information with the bank was intentional and therefore criminal under IRC Section 7206(1).    See a prior post,  What could be the focal point of IRS Criminal Investigations of Former U.S. Citizens and Lawful Permanent Residents?

Indeed, criminal cases are not simple, and I am not aware of any single criminal case that hinged exclusively on a false IRS Form W-8BEN.  However, I have seen cases, where the government has alleged the U.S. born individual must have signed the form intentionally, knowing the information was false.  It’s a question of proof and of course U.S. citizens wherever they reside, should take care to never sign an IRS Form W-8BEN as an individual certifying they are not a “United States person”; even if they think they are not a U.S. person

For further background information on this topic, see a prior post:  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

4 thoughts on “W-8s for U.S. Citizens Abroad: Filing False Information with Non-U.S. Banks

    renounceuscitizenship said:
    November 30, 2016 at 12:43 pm

    Reblogged this on U.S. Persons Abroad – Members of a Unique Tax, Form and Penalty Club and commented:
    This post contains a great review the W-8 series of forms. It is worth reading for that reason alone. But, I wonder about some of the other suggestions.

    Your conclusion that:

    “Accordingly, if a U.S. citizen were to sign IRS Form W-8BEN which I have seen banks erroneously request of their clients, they run the risk that the U.S. federal government will argue that such signatures and filing of false information with the bank was intentional and therefore criminal under IRC Section 7206(1).

    Indeed, criminal cases are not simple, and I am not aware of any single criminal case that hinged exclusively on a false IRS Form W-8BEN. However, I have seen cases, where the government has alleged the U.S. born individual must have signed the form intentionally, knowing the information was false. It’s a question of proof and of course U.S. citizens wherever they reside, should take care to never sign an IRS Form W-8BEN as an individual certifying they are not a “United States person”; even if they think they are not a U.S. person”

    With respect, I believe this statement is misleading.

    The relevant statute to which you refer is:

    “(1) Declaration under penalties of perjury

    Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; or . . .”

    A conviction requires NOT a false statement, but a false statement with full knowledge that the statement was false. To add to the absurdity, the definition of U.S. citizen is the definition under the Internal Revenue Code – a definition over which there is substantial disagreement AND disagreement that is substantial.

    It has become abundantly clear that few tax lawyers understand who or what a U.S. citizen even is.

    If the lawyers don’t even understand what a U.S. citizen as defined by the Internal Revenue Code definition, then how is some poor schnuck who has been given a W-8.

    In any case, a fair reading of your post leads to the conclusion that one should NOT complete any IRS form period. Maybe you are better off not playing “IRS Form Games” (when to use a Trumpism) “The form games are rigged.” If one completes the form one will be prosecuted for not agreeing to U.S. citizenship and if one does not complete the form, then …

    Actually, here is a question for you.

    What would be your conclusion if that same poor schmuck, knowing that he is NOT a U.S. citizen (or maybe he could never know that) decides to complete a W-9 because he wishes to be a U.S. citizen?

      impuestosypatrick responded:
      November 30, 2016 at 3:19 pm

      I have a couple of observations.

      1. The criminal statute cited to above generally requires the individual knowingly signed the document under penalty of perjury, knowing it is false –

      See, Jack Townsend’s post, for a more detailed discussion of the law; The Willfulness Element of Most Tax Crimes Not Present in All Tax Crimes (8/30/13) – http://federaltaxcrimes.blogspot.mx/2013/08/the-willfulness-element-of-most-tax.html

      In practice, I have seen this particular form (IRS Form W-8) used against an individual who was a dual citizen, by government investigators and lawyers who alleged he must of signed it knowing of its false statement.

      2. In the world of FATCA and the OECD CRS; it is generally not an option for individuals NOT to sign any forms. Banks throughout the world now require most all of their customers (certainly those with a minimum threshold of assets) to sign (even if electronically – via an electronically generated agreement that requires a “Yes/No” acknowledgement) as to their status as a “U.S. person.”

      3. The definition of U.S. citizenship is not defined in the federal tax law; there is no such definition in the federal internal revenue code (“IRC”). The IRC only refers to “citizens of the United States.” The definition of “citizen” is found in (1) the U.S. constitution, and (2) the federal immigration law (Title 8, Immigration and Nationality Act). The statutory definitions in Title 8 are quite clear, although not well understood among laypeople. See, for instance, 8 U.S. Code § 1401 – Nationals and citizens of United States at birth – and Child Citizenship Act of 2000 – Sections 320 and 322 of the Immigration and Nationality Act.

      4. Finally, addressing your question, what about a false IRS Form W-9 knowingly being signed under penalty of perjury by a “non-resident alien” who is not a U.S. citizen? As is always the case, the federal government has prosecutorial discretion to pursue or NOT to pursue particular cases. It is hard to imagine why the government would have any interest in pursuing such a case where the government would see no harm to itself.

      This is very different, than the case of a U.S. citizen knowingly signing a false IRS Form W-8 (or its equivalent issued by any bank around the world). In this case, the federal government has a great interest in trying to keep the integrity of a taxation system that relies heavily on (1) self-certifications, including (2) “voluntary compliance” of the U.S. tax system through self-assessment of taxes (see a good law student article on the topic, What Does Voluntary Tax Compliance Mean? – Penn Law: Legal … Manhire, http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1154&context=penn_law_review_online).

        renounceuscitizenship said:
        December 2, 2016 at 5:11 am

        Thank you for your comprehensive and thought provoking reply. Referring specifically to your point 3:

        “3. The definition of U.S. citizenship is not defined in the federal tax law; there is no such definition in the federal internal revenue code (“IRC”). The IRC only refers to “citizens of the United States.” The definition of “citizen” is found in (1) the U.S. constitution, and (2) the federal immigration law (Title 8, Immigration and Nationality Act). The statutory definitions in Title 8 are quite clear, although not well understood among laypeople. See, for instance, 8 U.S. Code § 1401 – Nationals and citizens of United States at birth – and Child Citizenship Act of 2000 – Sections 320 and 322 of the Immigration and Nationality Act.”

        You comment on both the issue of “citizen” under the Internal Revenue Code and “citizen” under the Immigration and Nationality Act. The issue is not so much what the definition of “citizen” is. The problem is under what conditions one has lost/relinquished U.S. citizenship. For all practical purposes the issue of signing the W-8 is NOT so much about the person who who was born or naturalized as a U.S. citizen. The problem is with the person who was born or naturalized as a U.S. citizen, who has then committed a “relinquishing act” and does not have a CLN “Certificate of Loss of Nationality”. Leaving aside relinquishments (under the INA) after June 16, 2008, the question is about those who committed relinquishing Acts many years ago – say the 60, 70s, 80s, etc.

        Let’s hypothesize a person who was:

        – Born in the USA

        – moved to Canada in the late 60s

        – became a Canadian citizen in say 1975 with the intent of relinquishing U.S. citizenship. The person clearly relinquished U.S. citizenship under the INA. The person did NOT apply for a CLN because no CLN has EVER been required under the INA.

        Now, we fast forward in time to 2016. This person gets a FATCA letter and is required to play “Form Games” (i.e. complete a W-8 or W-9).

        The Forms are related to tax administration. Although I do agree that the Internal Revenue Code does NOT define who is a U.S. citizen, it does say in S. 7701(a)(5) that one is treated as a U.S. citizen (whatever a U.S. citizen is) until one meets the requirements of S. 877A(g)(4). He is now faced squarely with the question of the correct interpretation of what is his “expatriation” date. Is he still a U.S. citizen under the Internal Revenue Code because he does NOT have a CLN? In other words, does the Internal Revenue Code override provisions of the INA? Does the Internal Revenue Code apply retrospectively – reactivating the U.S. citizenship status of someone who had relinquished U.S. citizenship? Or is he entitled to rely on the law as it was when he committed the relinquishing act in 1975. This is an issue that I believe you have written on before:

        https://tax-expatriation.com/2014/05/06/why-section-7701a50-is-so-important-for-those-who-relinquished-citizenship-years-ago-without-a-cln/

        There appears to significant legal opinion in favor of both interpretations. (Some believe that the person would still be treated as a USC under the IRC. Some believe the person relinquished U.S. citizenship in 1975).

        Question:

        How does the person who relinquished U.S. citizenship in 1975, but does NOT have a CLN deal with the W-8? In your post you write:

        ” It’s a question of proof and of course U.S. citizens wherever they reside, should take care to never sign an IRS Form W-8BEN as an individual certifying they are not a “United States person”; even if they think they are not a U.S. person”

        Does the person who clearly relinquished U.S. citizenship in 1975 (under the INA) complete the W-8 certifying that he is NOT a U.S. citizen. Does he complete the W-9 because he is worried that IRS might still regard him as U.S. citizen?

    david said:
    February 3, 2017 at 1:00 pm

    In my opinion if one is outside the USA these forms are no more than potential toilet paper and one can put on them whatever fiction satisfies the local bank. Absent a local law that defines an offence of filling in a US form incorrectly what could a local court do and why would it want to do anything at all?

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