Tax & Accounting Blog

IRS Will Allow Substitute Forms W-8BEN to Document the Foreign Status of a Payee that Otherwise Would be Reported on the New Form 1099-K

1099, 6050W, Information Reporting for Wealth Management, International Reporting & Compliance, ONESOURCE, Tax Information Reporting, TIN Compliance, Trust Tax, W-8 & W-9 Foreign Reporting, Withholding Management September 8, 2011

The new Form 1099-K will be used for tax information reporting of the gross amounts paid by a settlement entity to its participating payees.  Participating payees that will be reported are recipients that accept payment cards as a means of payment, and recipients that accept payment through third-party settlement organizations.  Payees with a foreign address are not required to be reported on Form 1099-K if, prior to payment, the payee has provided the payor with documentation upon which the payor may rely to treat the payment as made to a foreign person in accordance with Section 1.1441-1(e)(1)(ii) of the tax regulations.  The section 6050W final regulations state that the appropriate requirement is for the payee to complete a Form W-8BEN (or other W-8, as appropriate) to certify its foreign status and whether the payment constitutes income that is effectively connected with the conduct of a trade or business in the United States.

In Notice 2011-71, the IRS stated that payment settlement entities are permitted to accept a substitute form in lieu of the Form W-8BEN for purposes of I.R.C. Section 6050W and Form 1099-K reporting if the substitute form contains the following information:

  • Name of payee
  • Country of incorporation (where applicable)
  • Type of entity
  • Residence address
  • Mailing address if different from residence address
  • If payee is an entity, the capacity of the individual providing the certification on behalf of the payee
  • A statement using specific wording to certify under penalties of perjury that the payee is not a U.S. person. This statement can be the same as the certification and the penalties-of-perjury statement, which appear on the IRS Form W-8BEN, or the statement can use the following wording:

Under penalties of perjury, I declare that the payee providing this certification is not a United States person (i.e., a citizen or resident of the United States as determined for U.S. federal tax purposes, a corporation or partnership created or organized in the United States or under the law of the United States or of any State, any estate that would be subject to U.S. federal income tax on income from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States, or any trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust), that the income to which this certification relates is not effectively connected with the conduct of a trade or business in the United States, and that the undersigned has examined the information on this form and to the best of my knowledge and belief it is true, correct, and complete.  Furthermore, I authorize this form to be provided to any person that has control, receipt, or custody of the payment to which I am entitled or any person that can disburse or make the payments to which I am entitled.