Form W-8CE (Expatriation & Treaty Benefits Waiver 2024)

Form W-8CE (Notice of Expatriation & Waiver of Treaty Benefits in 2020)

What is the IRS Form W-8CE, When is it Due?

In general, for withholding purposes, Taxpayers have to file either a W-9 (U.S Person) or W-8 BEN (Non-Resident Alien). The purpose of these forms is to provide information to the withholding agent about whether the Taxpayer is considered a U.S. Person for tax purposes or a Non-Resident Alien (NRA). In the latter situation, in general the withholding agent will withhold 30% whereas for the W-9 it is based on additional factors as well. There is an additional W-8 Form (W-8CE), which is required for taxpayers who are covered expatriates and expatriating from the United States. Let’s take a brief look at the W-8CE.

Purpose of the W-8CE

The purpose of this form as provided by the IRS is simply to notify the payer that person is a covered expatriate. This can have a significant impact on how certain current and future income is taxed once the taxpayer is no longer considered a us person for tax purposes. In general, when the expatriate is ‘covered,’ the taxes will be worse (read: irrevocable waiver of treaty benefits).

• • • “Use Form W-8CE to notify the payer that you are a covered expatriate individual subject to special tax rules.”

When is the W-8CE Required?

The W-8CE is required in specific situations directly on the W-8CE. For example, if the Taxpayer has a specified tax deferred account (such as a Traditional IRA) or deferred compensation (401K), the W-8CE form may be required.

Who Must File

• • • “Covered expatriates are required to give Form W-8CE to the payer if they had any of the items identified in Boxes 1 through 4 on the day before their expatriation date. In addition, all expatriates must file Form 8854 with the Internal Revenue Service.”

Deferred Compensation items

• • • “Deferred compensation items include any interest in a plan or arrangement described in section 219(g)(5), any interest in a foreign pension plan or similar retirement arrangement or program, any item of deferred compensation, and any property, or right to property, that the individual is entitled to receive in connection with the performance of services to the extent not previously taken into account under section 83 or in accordance with section 83.

    • Eligible deferred compensation item (Box 1). A deferred compensation item is an eligible deferred compensation item if the following three conditions are met. 1. The payer is either a U.S. person or a foreign person electing to be treated as a U.S. person under an agreement with the IRS. (Separate guidance will be issued providing procedures to make this election.)

    • You notify the payer of your status as a covered expatriate.

    • You make an irrevocable waiver on Form 8854 of any right to claim any reduction of withholding on this item under any treaty with the United States. Check Box 1 if you have an eligible deferred compensation item. Checking this box provides notice to the payer that you are a covered expatriate who is waiving benefits under any treaty with the United States for the eligible deferred compensation item.”

Ineligible deferred compensation item (Box 2).

• • • “A deferred compensation item is an ineligible deferred compensation item if the three conditions listed above are not met. Check Box 2 if you have an ineligible deferred compensation item. Checking this box provides notice to the payer that you are a covered expatriate who is to be treated as receiving an amount equal to the present value of your accrued benefit on the day before your expatriation date.”

Specified tax deferred account (Box 3).

• • • “Specified tax deferred accounts include individual retirement plans (as defined in section 7701(a)(37)) other than arrangements described in subsection (k) or (p) of section 408, qualified tuition programs (as defined in section 529), Coverdell education savings accounts (as defined in section 530), health savings accounts (as defined in section 223), and Archer MSAs (as defined in section 220). Check Box 3 if you have a specified tax deferred account. Checking this box provides notice to the payer that you are a covered expatriate who is to be treated as receiving a distribution of your entire interest in the account on the day before your expatriation date.”

Nongrantor trust (Box 4)

• • • “A nongrantor trust is the portion of any trust (U.S. or foreign) that you are not considered (immediately before your expatriation date) to own under the grantor trust rules (see sections 671 through 679). The withholding rules of section 877A apply to a nongrantor trust only if you were a beneficiary on the day before your expatriation date.

    • Check Box 4 if you were the beneficiary of a nongrantor trust on the day before your expatriation date. Checking this box provides notice to the trustee that you are a covered expatriate who, unless the box below this line is checked, is deemed to have waived any right to claim any reduction in withholding on any distribution from this trust under any treaty with the United States.”

Timing

 According to the instructions in Form W-8CE — along with Notice 2009-85 — the IRS requires Taxpayers to submit the form either before the first distribution after expatriation or 30 days after expatriation. Taxpayers should do their best to try to submit this form timely, but if the taxpayer does not submit the form timely it is not necessarily fatal.

• • • “File Form W-8CE on the earlier of (a) the day before the first distribution on or after the expatriation date or (b) thirty (30) days after the expatriation date for each specified tax deferred account, item of deferred compensation, or interest in a nongrantor trust.”

When To File

• • • “File Form W-8CE on the earlier of (a) the day before the first distribution on or after the expatriation date or (b) thirty (30) days after the expatriation date for each specified tax deferred account, item of deferred compensation, or interest in a nongrantor trust.”

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