W-8BEN is a tax form used for people who are employed by US companies but are not US residents or citizens. This form is used to declare eligibility for relevant tax exemptions.
How does a W-8BEN tax form work?
W-8BEN, once filled out, is submitted to the employer. The employer uses the form to calculate the relevant amount to deduct from salary.
Filling the form out inaccurately can lead to the employer paying more taxes than necessary. It can also lead to compliance mishaps and penalties.
What is the difference between a W-2 form, a 1099 form, and a W-8BEN form?
W-8BEN, W-2, and 1099 can get confused at times. We quickly outline the differences below:
- W-2 – used at the end of every tax year to report the total amount of wages earned by an employee as well as the total amount of tax withholdings and deductions.
- 1099 – used to report income that doesn’t come from regular sources like salaries, tips, or wages, but rather sources like rental income, freelancing, or dividends.
- W-8BEN – used by people who’ve earned income in the US and are non-resident and non-citizen.
What are the challenges of W-8BEN form?
What gives W-8BEN forms added complexity is the nuanced differences in tax requirements depending on nationality and the relevant tax treaties.
There’s also the issue of document gathering – much document assembly is involved in submitting W-8BEN forms. Additionally, tax laws and regulations may be particularly liable to change in terms of taxation requirements for foreign workers. People and businesses alike need to constantly remain in the know regarding these changes.
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