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What is FORM W-8BEN and Why do I have to Complete it? | Part 1/3 - YouTube
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Hello, everyone on YouTube, Jim Baker
here . Making a video today about form
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W8BENformW-8BEN-E informed W9 more
specifically about form W8BEN because I
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get so many questions about this form.
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Because it's so confusing.
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And because I want to, I'm
hoping to clarify a little
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bit of it for everyone here.
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So I have, I'm making a video and I'm
going to break it into three sections.
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I might chop it up into
three different videos.
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And if so, I'll have the links to the
second and the third video link below.
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And they should all come
out at the same time.
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Cause I'm going to film it all at once.
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I think chop it into three videos
cause it might get a little long.
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Okay.
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So the first video.
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What is form W-8BEN-E and
why do I have to file it?
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Or I guess it's more appropriate to
say, why do I have to complete it?
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Right.
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So the first thing I want to share is
that for these forms are to certify and
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to verify your US tax withholding status.
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And you can see at the top of every
form and I'll open them up form W-8BEN.
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Let's open up the first one,
the WAP in a simple form.
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And on this form, you can see
I'll make myself a little smaller.
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So on this form, you can see it is
a certificate of foreign status of
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beneficial owner of United States tax
withholding requirements, and do not use
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this form if you are not an individual.
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So this is just for an individual person.
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And if you have a single member
LLC in the United States, then
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you technically it'd be required
to complete this form and give it to
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whoever's asking you for is generally
someone who's paying you something.
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So these forms are, are needed and
required to give to people, to companies,
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to businesses who are making payments
and who are paying you for something.
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And these are almost always
going to be US companies.
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And again, they're doing it
because they need to certify.
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Your tax status and see whether
they need to withhold taxes or not.
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And that's a whole, a whole additional
issue that I want to go over.
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And then I'm going to go over and, you
know, the second videos, which payments
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are subject to non-resident withholding,
but for now I want to get over just the
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concept, this form, the W-8BEN form,
W-8BEN, I'm going to open this one up too.
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This is for a certificate of
status of beneficial owner for
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United States tax withholdings.
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The same thing do not use this for
a US entity or a foreign individual.
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This is for generally
a foreign corporation.
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So we have a foreign individual, a
foreign corporation and form W-9.
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We have, I don't want to bring that
up to form W-9 is for a US person.
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So if you're a US citizen or a US
resident, or have a U S corporation,
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then you would complete W9.
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And those are the general re like,
uh, that's who would complete W9.
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So again, these forms, don't
go to the IRS, these just go
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to the person who's paying you.
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And they're held in case there's
some issue in the future and you
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were subject to withholding and the
US company didn't withhold any taxes.
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Then the U S company would be liable
for those taxes after the fact.
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And there was no way to get
them from a foreign person
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if you've already paid them.
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So, for example, if I'm paying
royalties to someone and I don't verify.
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They are a foreign person or not,
and I don't withhold any taxes.
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Then if the IRS comes back later
and says, you should have withheld
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these taxes and I hadn't done it,
I'm liable for those taxes, which is
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why US companies request these forms.
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The, the issue I have with it is that
very often US companies are misguided
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and they're withholding efforts and
withhold taxes on payments, which
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aren't subject to withholding.
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Okay.
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So there's a lot of forms like this.
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The best example I like is rental
payments, payments to non-residents
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rental payments paid to non-residents are
subject to withholding and think about it.
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Conceptually.
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And this, I use it for myself.
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Let's say I rented an apartment
and my landlord, the person
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who owns the apartment is some
guy who lives in Argentina.
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If I pay him my rent.
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Every month, he's supposed to
be paying tax on this income.
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He has a property.
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He's making it from doing business in the
U S he has a property in the U S however,
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if I pay him and the money is out of
the country, he doesn't file his taxes.
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I'm on the hook for 30% of what
I paid him in rental income.
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So for those who have rental properties
in their name in the US, and they
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don't want their tenant to withhold
it almost, I've never seen it happen.
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And I've tried to do it.
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And it doesn't even
people don't don't care.
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So w a ECI, this is a similar form.
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Let's open this one up to
certificate of foreign persons
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claim that income is effectively
connected with a trader business.
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So this is basically if you, if, if
I'm paying my landlord rent and he is a
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foreign person or an LLC, and I can't,
and he wasn't giving me a W9, then.
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I would get this filled out.
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And it was basically him saying that
he is going to pay taxes on the rental
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income that I pay him because it's not
it's, it's what I have to pay to rent
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the apartment and its income to him.
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So that's kind of like, I think
that's a good example of withholdable,
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um, of like the withholdings
and the purpose of these forms.
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These are just internal forms
to keep US companies off.
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For withholding taxes that that may
or may not be, um, required on the,
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some are very clearly required.
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And, um, I think, I think
that really goes over.
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What is formW-8BEN E and why
do I have to complete it?
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And that's really what a form
WFN, I'm just gonna take it out.
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And what is form AA?
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Ben white have to complete,
I think that's really it.
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You have to complete it to verify.
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Your your tax status.
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And I say, you, there is a company here
making a payment and the U S and then
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there's a foreign entity, a foreign
person, someone here that's receiving
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money from the U S entity and the foreign
person needs to verify their tax status
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with the U S person in case they're
withholding well, if requested first of
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all, and then the reason for it is the
certify that their tax status to determine
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whether withholding is required or not.
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So that's the purpose of the form.
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