Tax & Accounting Blog

Who Is a U.S. Citizen and Why It Matters: Part 5 – Documentation of U.S. or Non-U.S. Status

1099, ONESOURCE, Tax Information Reporting, TIN Compliance, W-8 & W-9 Foreign Reporting, Withholding Management October 19, 2012

To assist payments with the task of identifying U.S. persons (i.e., U.S. citizens, resident aliens, and U.S. entities), the IRS provides Form W-9 which, in addition to providing important information about a payee, may act as a certificate of U.S. status (unless the payer has reason to doubt the validity of the document). To be valid, the form must include a U.S. taxpayer identification number (TIN) that matches the named individual (or entity).

Foreign persons (i.e., nonresident aliens and foreign entities) may submit a Form W-8BEN as a certificate of foreign status. No U.S. TIN is required for a Form W-8BEN used for this purpose. (New forms and procedures being introduced under FATCA create two forms, a W-8BEN for individuals only and a Form W-8BEN-E for entities.) A Form W-8BEN avoids the presumption of U.S. status for individual payees under IRC section 1441 regulations (NRA withholding), which requires backup withholding on the worldwide income of individual payees who fail to provide a U.S. TIN with the exception for individuals being paid for services, all of which were all performed abroad. These service providers are presumed to be foreign if the payer has no knowledge, or reason to know, that the individual is a U.S. citizen or resident alien or that the income was effectively connected to the conduct of a U.S. trade or business.