Help! What should I do? My bank has asked me to complete a Form W-9 or a Form W-8BEN
We talk you through the differences between the two forms and, as a US citizen, which Form you should complete.
Melanie, I have a quite urgent situation as my bank has blocked my accounts and cards pending I send a W-9 or W-8BEN. Could you help me out with this?
Actual question from a U.S…. citizen based in Spain
So what are these Forms and why am I being asked to complete them?
These Forms help the US authorities obtain certain information relating to the accounts and income of their US clients, via the provisions of the FATCA legislation.
FAT CAT what?!
The Foreign Account Tax Compliance Act (FATCA), which was passed as part of the HIRE Act back in 2010, generally requires that foreign financial institutions e.g banks report on the foreign assets held by their U.S…. account holders or be subject to withholding on withholdable payments.
As an aside, the HIRE Act also contained legislation requiring U.S…. persons to report, depending on the value, their foreign financial accounts and foreign assets. (Hello FBAR – but that’s a whole other topic we have covered here!)
Form W-9 – Request for Taxpayer Identification Number and Certification
US Financial Institutions ask you to complete Form W-9 so that they can have on record your personal identifying information – name address tax ID – to enable them to report income paid to you on to the IRS, usually via a Form 1099 e.g interest or dividends, capital gains, royalties OR Form 1098 if you have paid income to the financial house such as mortgage interest if you were to claim a deduction.
Foreign Financial Institutions will ask you to complete Form W-9 in order to comply with FATCA reporting requirements imposed on them.
As a rule of thumb – if you are a US citizen or person you should complete this form and return it to the Financial institution requesting it. You should also ensure that reporting of these accounts are captured in your annual FBAR filing or Form 8938 if you meet the reporting thresholds.
What if I don’t complete the Form?
Well, as with the example mentioned above – the foreign financial institution could go as far as blocking your accounts or closing them. A US financial institution will likely apply “backup” tax withholding on your income which is usually around 30%.
Form W-8BEN – Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting
This is a W-9 Form equivalent for non US persons or entities – I see my non US citizen clients who say own US shares or have a US bank account which generates interest being asked to complete this Form, so that the financial institution knows the correct rate of tax withholding to apply to any income generated.
Different rates of withholding may apply depending on where the non US citizen lives e.g if there is a Tax Treaty or Agreement in place between the US and the foreign jurisdiction where that individual is tax resident the required withholding could be less.
As a rule of thumb – if you are US citizen or person, do not complete this form, as it will likely be the incorrect form for your tax status and could result incorrect tax withholding. If your financial institution asks you to complete this form, you should check in with them, inform them that you are US person and ask for the correct form for your situation.