What is the Difference Between W-9 vs W-8 Forms?

If you’re a US-based business that works with freelancers, knowing the distinctions between a W-9 and a W-8 can mean the difference between successfully cooperating with the IRS and facing fees or penalties due to non-compliance.

W-9 vs W-8 Forms – The Main Differences

In the chart below, we’ve outlined the main differences between the two forms. Take a look at the W-9 vs W-8 forms.

Some important distinctions between Form W-8 and W-9 are when and how to collect these forms and legal and compliance factors.

W-8

When and how to collect it: Foreign individuals must submit the form to the payer or withholding agent before receiving their income. Businesses paying foreign workers will collect and file these forms but do not submit them to the IRS.

Legal and compliance factors: Employers that don’t receive the form on time need to deduct 30% as tax withholding, or can face civil/criminal charges, penalties, or audits by the IRS.

W-9

When and how to collect it: Contractors must collect a W-9 if they earn over $600 in a tax year. Alternatively, businesses can download the form from the IRS website and send it to contractors.

Legal and compliance factors: Taxpayers face $50-$500 fines for non-compliance, civil penalties, or criminal penalties. Requesters are also subject to civil or criminal penalties.

What is a W-9 tax form?

Form W-9 (Request for Taxpayer Identification Number and Certification) is an IRS form that provides essential information to a person or business making payments to another person or business. A W-9 tax form is commonly used for independent contractors providing services to a company.

On the W-9, freelancers and independent contractors send their taxpayer identification number (TIN) or social security number (SSN) to individuals, clients, or businesses they work with.

Neither you nor your contractors should submit the W-9 tax form to the IRS—the form is meant to collect information in order for you to fill out the 1099-NEC and report payments over $600 during a tax year.

Who needs to fill out form W-9?

Any US citizen worker with a SSN or a TIN will fill out this form if they qualify as an independent contractor. This could be a:

• freelancer providing video content for your marketing department
• lawyer who drafts contracts for the company
• software developer working on a new product

The bottom line: anyone you hire who isn’t a W-2 employee needs to fill out a W-9 with their name, social security number, taxpayer identification number, and address.

You’ll then use that information so the IRS knows how much they need to pay in self-employment taxes.

What are the W-8 series tax forms?

While the W-9 is pretty straightforward, the W-8 is a bit more complicated. If you work with any non-US citizens or US citizens based outside of the US, you’ll need the W-8, so let’s break it down.

W-8 forms are for non-US tax residents to prove their foreign status so they don’t need to contribute as much federal income tax to the IRS.

Here’s where this comes into play. The US has different tax agreements with countries all over the world, so you’ll need to withhold specific amounts depending on where your independent contractor lives.

When you receive a W-8 from a non-US citizen or non-resident, you can calculate how much tax to withhold. This form is especially important because if a contractor doesn’t submit the form, they’ll need to pay a 30% tax rate that typically only applies to foreign workers.

This is where W-8s get tricky, though. There are five W-8 forms to manage tax requirements for those declaring a foreign tax ID status. While foreign contractors or freelancers don’t need to fill out all five forms, they need to know which to fill out.

What is a W-8 BEN?

Foreign workers fill out the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting’ (W-8 BEN) to prove they’re a foreign business owner.

Typically, foreigners pay a 30% tax on income from US payers, but if the foreign worker’s home country has a tax treaty with the US, this form helps them claim a reduction or exemption from US withholdings. Once foreign workers fill out the W-8 BEN, it’s valid for the year they signed and the following three years.

W-8BEN-E

The purpose of the W-8BEN-E form—the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting—is for foreign entities, not individual workers. If the country of residence has a tax treaty with the US, the foreign business can claim a tax reduction.

Just like the W-8 form, it’s on the foreign party to fill out the form and it’s valid for three years.

W-8 ECI

The Certificate of Foreign Person’s Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States is filed by foreign workers paid by US-based payers for a providing a service.

Any income reported on the EIC isn’t subjected to the 30% withholding rate, but after deducting relevant taxes, it’s also taxed at the rate for US citizens and resident aliens.

The W-8 ECI is valid for three years after signing.

W-8 EXP

The Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting or the W-8 EXP,  is for foreign governments, foundations, and tax-exempt organizations to claim reduced tax withholdings.

If the information on form W-8 EXP is correct, it’s valid for three calendar years.

W-8IMY

Officially named Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain US Branches for United States Tax Withholding and Reporting, an intermediary would use a W-8IMY to show a business received tax-withholding income from a foreigner or as a flow-through entity.

Just like with form W-9, freelancers or independent contractors will fill them out and send them to you so you can complete the 1099 NEC tax forms and send them to the IRS.

To sum up: one of the biggest differences between the W-9 and the W-8 is that W-8 is for non-US citizens or US citizens based outside of the US.

How do you fill in each form?

You’ll need to follow different steps and compile specific information when filling out each form. Here’s how to approach each.

Filling out Form W-9

For contractors, filling out Form W-9 is pretty straightforward:

• Line 1: Full name
• Line 2: Business name (or if you don’t have a business name, leave this space blank)
• Line 3: Federal tax classification (to avoid contractor misclassification)
• Line 5 and 6: Address, city, state, and ZIP code
• Part I: SSN or TIN
• Part II: Signature and date of signing

Form W-8BEN, however, follows a specific structure.

Filling out Form W-8BEN

This form is broken down into three parts. Here’s what the foreign contractors will need to include when filling out the W-8BEN:

Part I

• Name
• Country of citizenship. If they’re a dual citizen, enter the country of citizenship and residency
• Their permanent residence address
• The mailing address
• A social security number if they have one. If the contractor doesn’t have an SSN, they can get an individual taxpayer identification number (ITIN).
• Any referencing information that helps the withholding agent file correctly

Part II

In this part, the contractor is claiming treaty benefits due to their foreign country residence that has a tax treaty with the United States.

Part III

Part three stipulates that all foreign independent contractors and freelancers must sign and date Form W-8BEN, either by hand or electronically.

Of course, if you’re working with overseas contractors, you’ll need additional information, especially when working with EU professionals.

EU VAT and TIN identifications numbers

To work with a supplier, businesses need to verify their accounts and validate their legal status in the worker’s country of origin. In foreign countries, it’s essential companies validate the contractor’s foreign tax ID against the local tax authority.

You’ll need the IRS TIN and European Union VAT tax numbers to complete the W-8 and W-9 forms. Here’s the difference; the TIN can be a social security number, individual taxpayer identification number, and employer identification numbers.

VAT numbers verify supplier identities for companies based both within and outside of the EU.

As a business working with global providers, you’ll want to validate tax identification information—whether it’s through VAT or TIN—for any new or existing supplier to make sure you’re keeping your company safe from violating laws and regulations.

Ensure labor law compliance with Papaya

Whether you’re hiring contractors in the US or in any other country, correctly filling out the required forms and cooperating with local legislation is crucial for businesses.

Papaya’s network of designated country experts ensures total compliance regarding all relevant documents. Plus, the entire process is automated so that you never have to worry about data errors or miscalculations.

To ensure you’re complying with the strictest international standards and regulations, try a demo today.