IRS forms W-8 and W-9 serve distinct purposes in the tax system and are used by different groups to fulfill their tax obligations. A W-8 form is typically required from non-U.S. individuals or businesses to certify their foreign status and can enable filers to claim full or partial exemption from certain U.S. withholding taxes. In contrast, a W-9 form is for U.S. taxpayers, such as freelancers or contractors, and is used only to provide businesses paying them with their taxpayer identification number (TIN). These two forms help ensure accurate tax reporting and compliance for those who need to clarify their residency status or tax obligations.
A financial advisor can help you reduce your tax liability by creating a tax plan for your portfolio.
What Is Form W-9?
Form W-9 is an official request for a taxpayer identification number (TIN) and other basic information. It may be requested from U.S. persons, including individuals, partnerships, corporations, estates or trusts.
Typically, businesses use this form to gather necessary details from independent contractors, freelancers or vendors. The information allows them to correctly report payments to the Internal Revenue Service (IRS). There is a threshold for when a W-9 is required. When a company pays non-employee compensation of $600 or more within a year to any individual or company, it must complete a 1099-NEC form and needs the information in the W-9 to do that.
The W-9 form itself is relatively brief and asks only for a few key pieces of information:
- Name
- Business name (if applicable)
- Address
- TIN (This can be a Social Security Number for individuals or an Employer Identification Number for businesses.)
There is also a certification section where the individual affirms that the information is accurate and that they are not subject to backup withholding unless indicated otherwise. Backup withholding only applies to some cases.
One of these cases occurs when the taxpayer fails to provide a correct TIN. Another time is if the IRS has flagged them for underreporting income. In either case, a percentage of their payments is withheld to cover potential tax liabilities. Form W-9 is not submitted to the IRS directly. It goes to the entity that requests it.
What Is Form W-8?
Form W-8 is used by foreign individuals and businesses to certify their non-U.S. status and to claim tax treaty benefits, if any are available, for income received from U.S. payers. The purpose of the form is to inform the entity making payments that the recipient is not subject to the same tax withholding requirements as a U.S. taxpayer.
Completing a W-8 can let non-U.S. individuals and entities reduce or eliminate U.S. withholding tax on income. Relevant income includes dividends, interest, royalties and other forms of passive income sourced in the United States.
Types of Form W-8
There are several versions of Form W-8, each serving a different purpose:
- Form W-8BEN: Used by foreign individuals to certify their foreign status and claim tax treaty benefits,
- Form W-8BEN-E: Used by foreign entities, such as corporations or partnerships, to claim tax treaty benefits.
- Form W-8ECI: Used when income is effectively connected with the conduct of a trade or business within the United States. This may qualify income for a lower tax rate.
- Form W-8EXP: Used by foreign governments, international organizations, foreign central banks or tax-exempt organizations to claim exemption from withholding.
- Form W-8IMY: Used by intermediaries, such as foreign partnerships or trusts, to certify that they are receiving income on behalf of other individuals or entities.
The W-8 forms help ensure that income is taxed appropriately under U.S. law, while also allowing non-U.S. persons to take advantage of treaty benefits. These benefits can be significant, since many treaties call for less than the default 30% withholding rate.
These forms are kept on file by the withholding agent for as long as the payment relationship continues. Unlike Form W-9, W-8 forms have an expiration date and must be resubmitted every three years or whenever circumstances change. A move to the U.S. or another foreign country, for example, would require a new submission.
W-8 vs. W-9 Tax Form: Key Differences
Form W-8 and Form W-9 address distinct requirements for taxpayers based on their residency status, tax reporting obligations, withholding rates and renewal processes.
Residency Status
Form W-8 is used by foreign individuals and entities to certify that they are not U.S. residents for tax purposes. Form W-9 is used exclusively by U.S. persons-citizens, resident aliens, or domestic entities.
Tax Reporting Requirements
Form W-8 helps foreign individuals and businesses certify their eligibility for tax rate reductions or withholding exemptions under applicable tax treaties on U.S.-sourced income. Form W-9 is used by U.S. persons to provide their taxpayer identification number (TIN) to entities that pay them so that this compensation is correctly reported to the IRS.
Withholding Tax Rates
For non-U.S. persons who complete a W-8, the default withholding rate is typically 30%, although this can be reduced if a tax treaty exists. For U.S. persons completing a W-9, there is generally no withholding tax applied to most types of income. However, backup withholding at a rate of 24% may apply if the individual is flagged by the IRS or fails to provide accurate information.
Expiration and Renewal
Form W-8 expires and typically needs to be renewed at least every three years, depending on the circumstances. Form W-9 does not have an expiration date. Once submitted, it remains valid indefinitely unless the individual's circumstances change-such as a change in residency or taxpayer identification number.
Bottom Line
Form W-8 and Form W-9 play distinct roles for taxpayers based on their residency status and tax obligations. Completing the relevant form can help you report income accurately and make sure that it gets taxed accordingly. This can result in tax benefits such as reduced withholding rates, while avoiding potential complications, delays and added costs.
Tips for Tax Planning
- A financial advisor could help you optimize your portfolio for taxes. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
- Reducing your tax bill when you earn a higher income generally doesn't mean applying just one single approach. Here are seven general strategies you could use.
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