Do Expats File Form W-9 or W-8BEN
When a US company or other person is required to file certain returns with the Internal Revenue Service, such as an employer or Foreign Financial Institution, they are required to make sure they provide accurate information to the Internal Revenue Service about the status of their staff and/or customers. For US taxpayers, they generally are required to submit a form W-9. For nonresident aliens, they are required to file a form W-8BEN — for example, if there is a US institution that is required to withhold tax from non-resident alien (NRA) clients. This is common in the situation in which the NRA has investment income in the United States which is considered FDAP, and the US institution is required to withhold 30% for taxes unless certain treaty elections or other withholding rules/regulations reduce or eliminate that requirement. A common question we receive is what happens when an expat resides overseas — which of these two forms do they file?
in a typical example, a U.S. citizen may reside overseas and opens a U.S. Investment account. That investment account may be located in the United States or overseas, but either way, the institution reports to the US government. It is very important that the US expat understands that even if they reside overseas until they have formally expatriated from the United States, they are still considered a US person for tax purposes — even if they reside the entire year outside of the United States. Therefore, the taxpayer would submit a form W9.
After the US expat formally expatriates from the United States, the rules change. Following expatriation, the US person is no longer considered a US person for tax purposes and instead would be considered a non-resident alien. Therefore, the taxpayer would only submit a form W-8BEN and not a form W-9 because they are only subject to withholding on certain types of income that are considered US-sourced.
Substantial Presence Test
As a side note, when a person is a US person only because they met the Substantial Presence Test then either after they no longer qualify for substantial presence and/or qualify for the Closer Connection Exception or other exclusion, they should be sure to file the form W8-BEN. During the time period in which they are considered a US person, they should file a W-9.
Tax Treaty Election
If an expat is not a U.S. citizen, but rather a permanent resident and resides outside of the United States, they may consider making a treaty election to be treated as a foreign person for tax purposes. This may impact whether they are required to file Form W8BEN or W9.
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