What is IRS Form W-8BEN and Why Is It Important for Receiving U.S. Income?

If you're a freelancer or independent professional receiving income from the United States, you’ve probably heard of Form W-8BEN. This form is crucial for individuals who are non-residents in the U.S. and receive income from U.S.-based clients or companies. Completing the W-8BEN correctly can help you reduce or even eliminate withholding taxes on the income you generate from the U.S.

In this blog, we explain what Form W-8BEN is, why it’s so important for those receiving international payments, who needs to submit it, and how to fill it out correctly to optimize your income.

1. What is IRS Form W-8BEN?

The Form W-8BEN, officially known as the Certificate of Foreign Status of Beneficial Owner for U.S. Tax Withholding, is a document issued by the U.S. Internal Revenue Service (IRS). It is designed for non-U.S. individuals who receive income from U.S. sources, such as payments from clients, payment platforms like Stripe, or royalty income. By submitting this form, you can claim a reduced or exempt tax withholding rate on that income.

It’s important to note that this form is only for individuals, not for businesses or other legal entities. Foreign companies need to submit IRS Form W-8BEN-E.

What does “tax withholding” mean?

Tax withholding is an amount that U.S. payers are required to withhold from payments made to foreign individuals. This amount is generally 30%, but due to tax treaties between the U.S. and various countries, individuals who submit Form W-8BEN can request a lower withholding rate or, in some cases, a total exemption.

For example, if you reside in a country that has a tax treaty with the U.S., you may qualify for a lower withholding rate than the standard 30%, meaning you receive more of your earnings.

2. Who Needs to Submit IRS Form W-8BEN?

Form W-8BEN must be completed by any non-U.S. resident who receives income from a U.S. source. This includes independent professionals, freelancers, content creators, artists, writers, and any other individual earning income from the U.S.

Some examples of those who need to submit W-8BEN include:

• International freelancers working for U.S.-based clients.
• Content creators receiving payments via platforms like Stripe, PayPal, or Deel.
• Artists or musicians earning royalty income from the U.S.
• Consultants or coaches offering services to U.S.-based businesses or individuals.

Submitting Form W-8BEN is necessary to indicate your tax residence and avoid the default 30% withholding rate on your payments. Without this form, U.S. payers are required to withhold 30% of your income, which can significantly reduce your earnings.

3. Why is Submitting IRS Form W-8BEN Important?

Submitting Form W-8BEN is essential if you want to receive income from the U.S. without unnecessary tax withholdings. By completing the form correctly, you can claim tax benefits under tax treaties between the U.S. and your country of residence, potentially reducing or even eliminating the tax withholding on your payments.

Key Benefits of Submitting W-8BEN:

1. Avoid the 30% withholding on your income.
2. Request a reduced withholding rate based on the tax treaty between your country and the U.S.
3. Maximize your income by avoiding unnecessary taxes.

For example, if you reside in a country with a tax treaty with the U.S., you may qualify for a withholding rate of just 10% or even less, instead of the standard 30%. This savings can make a big difference in your annual earnings.

Requirements for Completing W-8BEN:

1. Passport: You will need to provide your full name as it appears on your passport.
2. Residence Address: Ensure that you use your permanent residence address in the country where you live, as this will be key to applying the tax treaty, if applicable.
3. Tax Identification Number:
   • If you have an SSN (Social Security Number) or ITIN (Individual Taxpayer Identification Number), you must include it on the form.
   • If you don’t have an SSN or ITIN, you may not need one if your country has a tax treaty with the U.S., but this depends on your specific situation.

4. Submission and Processing Time for IRS Form W-8BEN

Once you’ve completed the form, you need to send it to the payment platform or U.S. client who pays you, such as Stripe, PayPal, or Deel. The review process can take between 8 and 24 hours. If everything is in order, you’ll be able to receive your payments without the default 30% withholding applied to foreign recipients.

5. How Can We Help You Complete IRS Form W-8BEN?

• Personalized Consulting: We guide you step by step to complete your form correctly and avoid errors.
• Review and Submission: We review your form before submission to ensure it meets all requirements.
• Ongoing Support: If you have questions or need help in the future with managing your U.S. income, we’re here to provide continuous support.

If you have questions about Form W-8BEN, contact us and receive help to complete your form and maximize your international income without unnecessary withholdings.