Form W-9 vs. Form W-8BEN

The IRS Form W-9 and IRS Form W-8BEN are two different types of withholding certificates completed by individuals.

Generally, a U.S. tax resident completes Form W-9 while a non-U.S. tax resident completes Form W-8BEN.

Why is This Important for Temporary Residents with Work Visas?

If a non-U.S. person obtains a resident visa to move to the U.S. for employment, they will become a U.S. tax resident once they are physically present in the U.S. for enough days to meet the substantial presence test. After becoming a U.S. tax resident, the individual must complete the IRS Form W-9 withholding certificate by listing their name, social security number, and address.

When the non-U.S. citizen’s work visa expires and they return to their home country, their U.S. tax residency ends. If the individual still has U.S. bank accounts or brokerage accounts, they must update their withholding certificate and change from a Form W-9 to a Form W-8BEN.

How Does This Change Impact Your Taxes and Reporting

When a non-U.S. person receives U.S. source fixed, determinable, annual and periodic (FDAP) income, the payor must generally withhold 30% in taxes on the gross payment amount.

U.S. persons are generally not subject to this withholding tax; however, the U.S. person must report all of this investment income on their Form 1040 (US Individual Income Tax Return) and pay ordinary income taxes on the earnings.

Example of Change From W-9 to Form W-8BEN

Assume John Doe is a citizen and resident of Bermuda, and he moves to Miami, Florida, under an L Visa to work for his employer’s Miami office. John became a U.S. tax resident and used Form W-9 to open bank and brokerage accounts. John can receive interest & dividend income without the 30% withholding tax because he is a U.S. tax resident.

When John’s L-1 visa terminates and he returns to Bermuda, he will sever his U.S. tax residency once he no longer meets the substantial presence test. John must contact his U.S. banks and brokers to replace his Form W-9 with Form W-8BEN.

Any future payments of FDAP income will now be subject to the 30% withholding tax because John is a nonresident of the USA.