W8 Vs W9 Form: Which Is The BEST For US Company? - YouTube

Hello, YouTube.

Good afternoon.

It's James Baker CPA.

Your favorite international tax consultant.

And today I have a call with a gentleman from the UK who is servicing

US clients with a US company.

And he's having issues with his clients because they want a w 9.

He thinks he should do a w 8

. What's going to happen?

. What should he really give them?

What are the risks here?

What are the exposures here?

So if you are a person living outside of the U S and you want clients who

are from the U S or U S companies, or you already have these kinds of clients.

This video has valuable information for you.

So I encourage you to stick around to the end.

And if you like these style videos and you want to, uh, learn more about

this kind of stuff, don't forget to like, and subscribe does all.

I talk about internet national business, a lot of international

taxation kind of stuff, and mostly, you know, entrepreneurship and find

entrepreneur entrepreneurship, and find a success with this stuff.

So like subscribing, uh, let's get to the call right now.

How are you doing today?

Yeah.

Yeah.

I'm good.

Thanks.

Where are you?

Uh, where are you calling from?

Um, from the UK.

Awesome.

Yeah.

Yes.

So, um, you're from the UK.

Tell me, tell me about yourself.

What, uh, what will you do for business?

How can I help?

Yeah, but basically our, um, just recently incorporated, uh, uh, LLC in the, in the

US , um, we're a digital marketing agency.

And, um, um, a lot of the clients that we work with in the U S

they're they're requesting, uh, um, for me to fill out a w 9 form.

But, um, when I read the w 9 form the instructions, it says, if you're

foreign owner of a disregarded entity, then you have to complete form W8.

That's right.

Um, and then, you know, um, actually got a client who emailed me today saying that,

um, since I've got the E um, the EIN for the company, then they, they require, they

still require a w nine for the entity.

So.

I'm just a bit confused.

Yeah.

Well, most people, especially in well, tax, people are confused about this,

but regular business owners have no idea what they're, what they're doing.

I'm you, you're smart.

You read it, you read the instructions and it's pretty clear if you go really

slow and you read the instructions, the w 9 is to certify that you're

paying taxes in the U S and you won't be paying taxes in the US.

The fact is it really shouldn't matter to them.

They shouldn't, it shouldn't really make a difference.

If you give them a W8.

Hmm.

It just means they literally had to have less to do.

They won't have to give you a 10 99 at the end of the year.

So with a w8 a dab less to do, they're paying you for your services, right.

They're not paying you, you don't have ownership of the

company or anything, right?

Yeah, exactly.

Exactly.

So, yeah, so yeah, I mean, you're completely right.

Give them a w 8.

You just need to, um, I guess, share this video with them when you, when

you talk to them, because I pay people outside the U S to do services for me.

I have a.

You know, I do a lot in Spanish and Latin America.

I have attorneys in other countries and stuff that worked for me and

I, and I pay them all the time.

And, uh, I, you know, I don't even ask for the w 8 for most of my clients is

because really the w 8 and the w 9 are most important when you're doing, um,

when you have like withholdable payments.

Right?

So if I know someone's a foreign person, uh, By nature.

If I'm paying an individual who lives in another country, I don't, you know, the w8

and the w 9 doesn't get sent to the IRS.

That's a form that's just held internally.

And the reason I would ask for a w 9 is so that I can issue a form 10

99 at the end of the year, and show that how much I paid you to the IRS.

However, since you're a non-resident, you don't qualify to have that form

completed for you because you shouldn't have to file anything in the U S.

Um, but really there's less for them to do.

They would pay you just like anyone else pay you regularly and how

they, how they agree to pay you.

And as long as they're not paying you for royalties or dividends

or other things like that, they wouldn't even need a w8 I mean, they

can, they can request it for fine.

You can give it to them.

It's really easy for you.

Yes.

Yes.

Okay.

And so, But if they insist on a w 9, I mean, if the only, I mean, if,

like I said, I guess you have two options, you can put, keep pushing

and have them talk, schedule a call for them to talk to me or something.

We talked together and we'd go through it and I can explain

to them why they don't need it.

But if they have strong internal procedures and they're only working

with Americans, um, before, and they just want to follow the steps.

Then you could, I guess you could give them a w 9.

It wouldn't be correct.

And it might cause some hiccups for you later.

Uh, but the, the truth is, is.

It's not going to cause you to have to pay taxes in the U S you know,

it's the facts and circumstances are that you're in the UK doing work

from the UK, paying taxes in the UK.

We have a good treaty with the UK.

You don't have any US source income.

Uh, well, you don't have any effectively connected income with us trader business.

Cause you're not doing anything in the U S so if you had to give them

a w 9 I guess you could, it's just, wouldn't be the right way to do it.

But if that's the only way you can get paid by this client, which is probably

sounds like a bigger client, like it's a bigger company then, because smaller

people won't ask for this form ever.

Yeah.

I don't ask for it.

So, yeah, it's a bit that's we got to do.

I mean, it's a big corporate.

Yeah.

Do it.

Get paid . Figure that out later.

Just get paid, get that money and then figure it out later.

Yeah, exactly.

Yeah.

I mean, it's, I think it's the second client that has asked me.

Um, yeah, they're quite big clients.

So like, all right.

What do I do?

Because they're asking it for the entity.

So, because what what's difficult for me.

Is is the line one of the w 9 form.

It clearly states that it's, if you're a taxpayer, you put your name there.

And then at the bottom you have to sign under these penalties of perjury

statements that like, yes, I, I certify that this is true and complete, and I

am under us taxpayer, blah, blah, blah.

So that's obviously like, not reassuring.

Of course I get it, man.

I get it.

Um, this form is held internally.

It might, it might cause some hiccups and stuff later, if you can push back

and just explain that to them or just give that, you know, that would be better

for you, but if you can't then just give them the w nine and keep that's

what I mean, I'm an entrepreneur too.

You gotta, you gotta get paid.

You gotta keep working.

You don't wanna lose a contract over some stupid practicality.

This form isn't even going to the IRS.

Okay.

It's an internal thing.

So, um, so, so they will put it down on the 10 99 miscellaneous.

No Maya.

Yeah, we will, but we'll still file a tax return.

Uh, it's not going to be associated with your person is going to be

associated with the company and we'll file a 10 40 NR for the company.

I mean, not 10 40 an hour, 54, 72, uh, for the company, but you don't

even report the sales on that form.

So, I mean, it's pretty low, it's like low risk, but it could, I

guess it could create some kind of headaches in the future.

I just don't.

Um, I don't know.

It's it's you gotta, you gotta, you know, the right way or the way to get

paid and you see like the risks do it.

I don't think it's very risky.

I think it's a safe thing to do in terms of like, you're not going

to have to pay a lot of taxes.

You shouldn't have huge penalties.

It's a common mistake here, a small you're a small entrepreneur, you know,

you're a guy doing your own thing.

So, yeah.

Um, I mean, I wouldn't, I would just, I would push a little bit more maybe, and

then just give them the w 9 and say, okay.

Here, whatever.

Okay.

Okay.

So, I mean, in terms of invoices, like, you know, when I invoice the

client, I can put the company name.

Yeah.

I mean, you should, I'm imagining you have a company bank account, right?

Yeah.

Yes, yes.

So, I mean, that's what you would invoice with a company

name and a company bank account.

Right, right.

Okay.

Okay.

Well, I just have to, I have to spell it out to them and show

them, look, this is what it says.

A double D nine.

Yeah.

I, I talked to, uh, an international tax advisor, if you want, I'll share that.

Cause this is a YouTube call.

So you can just share this video with them.

Like, Hey, here's a video.

I found on YouTube saying that it's okay.

Yeah.

It is a video with you in it.

Yeah, that's it?

Yeah.

I mean, you could do that.

And then they're hiring people to be like, okay, Neither of them

know what they're talking about.

We know we're HR at this company, so yeah, exactly.

You don't know.

Yeah.

All right.

That sounds good.

And what kind of digital marketing you're doing?

Um, mainly lead generation.

I mean, we used to do full stack, digital marketing, like

everything under the sun buck.

We're just focusing on lead generation because that's what clients want.

They want more clients and customers.

So.

Just give them what they want.

Yeah, yeah.

Yeah.

They want, they, they use, it's a means to an end.

Right?

Do they want, they want a bunch of social posts and more leads, just one more lead.

So you got to figure out what works for its business.

That's when yeah.

Especially getting, getting into that is very, uh, that can be very profitable.

What industry are you working in with these guys?

Um, right now, um, we will, we've got some insurance, um,

clients, so very big industry.

Yeah.

Yeah.

Yeah, so insurance and solar at the moment.

Oh, cool.

Um, but in the U S that is, um, and yeah, yeah.

It's very demanding and yeah.

You know, the clients want, they want the right tax forms completed and

it's like, ah, insurance company, there are under a lot of regulation.

They have to do a lot of forms and a lot of regulars.

So it would probably have really tight procedures.

You know, you can't, you can't blame them.

They're doing, everyone's doing their job.

Everyone's, you know, you're not going to get to talk to the head of their

compliance division to push this through, you know, they're not going to change it.

I had another client, you know, it's just, it's just, this is just enforced.

Um, the IRS gives so little guidance.

There's no practical guidance and it's enforced differently, uh,

among all different companies.

So like, you'll talk to you, go to Geico and, and they won't, they

won't, they'll say the w it's fine.

You go to Allstate and they say, we want a w nine.

And it's just.

Is this the same country, you know, it is the same.

It is, but they just, it's just inconsistent because the guidance is poor,

but in the end you should be able to get paid and not have to pay any taxes in the

U S so it shouldn't be a problem for you.

It's just, uh, the details, you know?

So, so if, if I, um, what's the word, if, because I am a single member,

um, Single member owner of the LLC.

So if I filed for like a corporate entity or sorry, or if I requested to be

considered as a corporate entity or yeah.

Would that change?

How, um, would that change?

What form?

Yeah, sure.

If you do that, then you would go correctly to submit it.

Okay.

However, then you have to pay taxes in the U S and the profits of the company

has, and then you have to deal with the cross border stuff with the UK.

Right now, it's easy for you because you're in the UK.

Use the LOC you pay tax in the UK.

If you have a Corp, it gets a little bit messier for you because you have a us.

Company that supposed to pay taxes, but you're doing all the work in the UK.

So then it's a little bit like how much you pay tax on the UK, how

much in the us, how's the sourcing what's permanent establishment.

Cause then cause then you have like a, you could have permanent establishment

issues, whereas like you're as basically a us company doing business in the UK and

then it gets it's a little bit messier.

I mean, in certain situations I would, you know, it might make sense in years.

It's it makes sense just to do it, keep it simple and just

focus on what you're doing.

Pay tax in the UK.

Yeah.

There's no reason to over-complicate it.

Okay.

Okay.

All right.

That's good to know.

That's good to know because we've all these clients demanding a w nine.

Like, should I just change it to make my life?

Yeah.

I mean, you, you could, um, you could change it and then open

another LLC and just pay all the profits out of the Corp DLCs.

The court makes no money in the LLC makes all the profits.

I mean, it's.

And just use the use, the corporate receive payments, but I don't really know

if it's necessarily, if it's necessary to do all of that, she's in to do that.

Yeah.

It makes sense for a lot of people, but I mean, you have a really simple model, man.

You're just working, you know, why don't you use the UK LTD?

They can't pay you with a UK company, like a pastor in the UK.

Yeah, yeah, yeah.

But I find most of my clients are in the U S so.

That's what I'm, that's what I be telling people too.

It's uh, uh, UK has good, you know, they have good LLC equivalent companies,

you know, um, pay more way more taxes there, but, um, yeah, it's just for

the cost and the, the difficulty.

It's not that hard.

It's easier to have a us account.

You paid here in the U S yeah.

Yeah.

That's it.

That's it?

Um, no.

Cause I was contemplating setting up.

A UK limited company, but since all my clients are in the us, I

might as well set a LLC and make it easier for them to pay me.

Exactly.

And that's why, that's what I would.

I recommend that to people too.

There's a lot of reasons.

That'd be us company getting paid easier is a great rate.

Exactly.

Yep.

Yeah.

Okay.

No, that's good.

Well, thanks for that, James.

Um, you've given me a little bit more confidence that what I've read

it's, you know, it's valid and, uh, I found that, uh, I know a little

bit more than some of these company compliance teams read the instructions.

Yeah.

Just literally every form has its own instructions.

You read through the instructions.

You're like, well, This isn't right.

And they're like, no, we need it.

You know, whatever the, I mean, like, like I said, and like, you

know, these aren't tax people either.

These are just someone who works in HR for an insurance company, you know,

they're just following the steps.

So yeah, it's a it, whatever, just give them their w nine, uh, if they,

and if everyone's asking for whatever, just give everyone the w nine.

And then we'll, we can deal with the repercussions later and just say like,

look, they wouldn't accept the WAC.

And the IRS is never going to ask.

It's just going to make me like, kind of, you might have to the, I guess the worst

case scenario is the IRS reaches out.

Cause you have all of these 10 90 nines and you didn't pay any

taxes and then you just have to explain to them what happened.

And I've done that.

I've had to do that before the IRS.

Oh, right.

Okay.

Okay.

And that's not even guaranteed.

That's just, you know, it could happen.

So, you know, save my contact in case that comes up.

If you need help with annual filings, whatever, if you want to follow

up, make sure it's good year over year, um, you know, re reach out.

Okay.

No, definitely.

Yeah.

Yeah.

That's one thing I wanted to ask you as well.

So I guess, um, I just incorporated in June, so it's not until December.

Yeah, just to the year end is Jen is January 1st to December 31st.

And then you don't have to do the filings until, you know, March and April, but we

can get them done in January, February as well, just get them done quicker.

Okay.

Okay.

All right then.

Okay.

I think, yeah, that answers all of my questions really.

I mean, I just wanted to know if there was anything.

You know, as a us company owner, is there any finger I need to consider

on a daily, weekly, monthly basis?

No.

No, you're good.

Okay.

Okay.

All right.

Good.

So it's, it's, it's, it's not that complicated and no, it's not.

Um, you know, there's nuances.

Yeah.

There's some nuance to stuff, but yeah, you should be fine.

Just keep, keep it focused on making money and then you should be good to go.

Okay.

Great.

Good stuff.

All right.

Thanks for that, James.

So yeah, I'll, I'll, I'll reach out to you and that tax time.

Sounds good.

Thanks for, thanks for checking us out on non YouTube and

following and all that stuff.

And, uh, I'm gonna, I'll be making more videos soon.

I'm going through some stuff right now, some, oh yeah.

Great.

I really appreciate that.

The calendar.

Yeah, no, I really appreciate your videos.

I've learned quite a lot from I'm happy to help.

Thanks you too.

And happy to help.

So.

Great.

Well, we'll, we'll be in touch then, I guess touch.

Yeah.

All right.

Thanks a lot, James.

You too.

See you later take care.

So that call went well.

Uh, Tino has some great questions about, you know, it brought to light

some of the things that be ha that happened all the time with, uh,

us companies paying non-residents, like I said, the guidance is poor.

So if you are working with us companies and they're asking for a

w nine, but you shouldn't be giving them a w nine because it's not right.

Push back a little bit, but, and most importantly is to get

paid, to grow your business.

And that's what I do.

I always say, figure out how the best way that to navigate, just getting paid and

then figure out the details later because the facts in the, in the IRS, as I, as

the facts and circumstances are really what, um, you know, command what, what

they determine, where you have to pay tax, you know, it's where you, where the

facts and circumstances are like, where are you actually living and working?

Not the necessarily the internal forums.

So I, you know, I hope you liked the video.

I think it was really, uh, informative.

Uh, I'm great.

Happy to be back here.

Um, making some videos for you.

If you want to schedule a call with me or the team or seeing any of

this stuff, check the description.

There's a lot of information there.

And, uh, to schedule calls, YouTube calls, paid calls, whatever kind of

calls you want, and also information, some courses, some other videos that

I think are really great and helpful.

And from there, I think that that's basically it.

Thanks for watching, like subscribe, I'll see you in the next video.

Don't forget to subscribe because I am putting out a lot of them.

Um, coming up soon, I have a huge list of videos.

I'm going to crush and give a lot of value for you guys, uh, who

are trying to grow your us company from outside the U S mostly.

Okay.

Thanks.

And I will see you in the next video.

Thanks everyone.