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The W8BEN, or Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) is a form which, when completed, is provided to the US income provider (Not the IRS!) in order to prevent 30% of your earnings being withheld and remitted to the IRS.
The W8BEN claims the treaty rate between Canada and the US which means you cannot be taxed by both countries on the same income, and by completing this form, you are certifying the following information to the IRS;
I am the individual that is the beneficial owner (or am authorized to sign for the individual that is the beneficial owner) of all the income to which this form relates or am using this form to document myself as an individual that is an owner or account holder of a foreign financial institution,
The person named on line 1 of this form is not a U.S. person
The income to which this form relates is:
(a) not effectively connected with the conduct of a trade or business in the United States,
(b) effectively connected but is not subject to tax under an applicable income tax treaty, or
(c) the partner’s share of a partnership’s effectively connected income,
The person named on line 1 of this form is a resident of the treaty country (in this case, Canada) listed on line 9 of the form (if any) within the meaning of the income tax treaty between the United States and that country, and
For broker transactions or barter exchanges, the beneficial owner is an exempt foreign person as defined in the instructions. Furthermore, I authorize this form to be provided to any withholding agent that has control, receipt, or custody of the income of which I am the beneficial owner or any withholding agent that can disburse or make payments of the income of which I am the beneficial owner.
I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect (changes).
In a nutshell, you’re telling the IRS, you are NOT a US person, that you do not work in the US and that you will report your income to the CRA.
The June 30th deadline to file your Report of Foreign Bank and Financial Accounts, also know as FBAR’s with the IRS is rapidly approaching. If you are a US person and have more than $10,000 in any foreign financial account (or are a signatory authority) then you need to file these by the deadline. These accounts include; bank account, brokerage account, mutual fund, trust, or other type of foreign financial account.
The Bank Secrecy Act requires US persons to report annually to the IRS any foreign financial accounts and their dollar amounts, however, under FATCA, those US persons who have not been doing so, will have their information reported for them by Foreign Financial Institutions (FFI’s) to the IRS and the penalties can be quite large.
If you are an US person, then you are required to submit this filing if;
1. You had a financial interest in, or signature authority over, at least one financial account located outside of the US; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
Stepping back for a second, the IRS through FATCA has provided a clear definition of what constitutes an US Person” and you are an US person for taxation purposes if you are;
• US citizen;
• US resident based on the number of days spent in the US during the year;
• US green card holder (even if the green card has expired);
• US created corporations, partnerships, limited liability companies which were created or organized in the US or are owned by US persons;
• US created partnership;
• US estates and trusts – formed under the laws of the US or created by US persons;
• Virtually everyone born in the US;
These rules also catch those with dual nationality, even if such persons are registered taxpayers in a non-US country (the US considers you “foreign” and asks you to complete a Form W8-BEN) These regulations also can include individuals who were born outside the US but who have at least one US parent.
Worried yet? So now you probably want to know more about when the FBAR’s are due.
The FBAR is due by June 30th of the year following the year that the account holder meets the $10,000 threshold. There are no extensions as there are for US personal tax returns. Filers cannot request an extension of the FBAR due date.
If a filer does not have all the available information to file the return by June 30, they should file as complete a return as they can and amend the document when the additional or new information becomes available.
If you need help filing the FBAR’s you can reach the IRS Monday – Friday, 8 a.m. to 4:30 p.m. Eastern time, at 313-234-6146 for callers outside the US, or send an email to the IRS at FBARquestions@irs.gov. The email system does not accept actual FBAR reports.
Once completed, the FBAR’s are sent to;
U.S. Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621
If an express delivery service is used, send completed forms to:
IRS Enterprise Computing Center
ATTN: CTR Operations Mailroom, 4th Floor
985 Michigan Avenue
Detroit, MI 48226
The contact phone number for the delivery messenger service is 313-234-1062. The number cannot be used to confirm that your FBAR was received.
The FBAR is not to be filed with the filer’s Federal tax return.
Alternatively, a FBAR filing verification request may be made in writing and must include the filer’s name, taxpayer identification number (TIN) and the filing period. There is a $5 fee for verifying five or fewer FBARs and a $1 fee for each additional FBAR. A copy of the filed FBAR can be obtained at a cost of $0.15 per page. Check or money order should be made payable to the United States Treasury.
It is also possible to amend previously filed FBAR’s. It can be done by;
Checking the Amended box in the upper right-hand corner of the first page of the form;
Making the needed additions or corrections;
Stapling it to a copy of the original FBAR; and
Attaching a statement explaining the additions or corrections.
Beginning July 1st, 2013, Mandatory Electronic filing of FBAR forms!
E-filing is a quick and secure way to file FBAR’s and filers receive an acknowledgement of each submission right away.
So if you were required to file FBAR’s and failed to, the consequences can be quite alarming!
Failure to file a FBAR when required to do so may potentially result in civil penalties, criminal penalties or both.
If, as is the case for many Canadians who were not aware of the requirement to file US tax returns, you learned that you were required to file FBARs for earlier years, then you should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be asserted if the IRS determines that the late filings were due to “reasonable cause”.
Otherwise, cumulative FBAR penalties can actually exceed the amount in a taxpayer’s foreign accounts under the penalty provisions found in 31 U.S.C. 5314(a)(5).
Keep copies of what you have sent to the IRS, and the supporting documentation, for a period of five years. Failure to maintain required records may result in civil penalties, criminal penalties or both.
The IRS allows filing of FBAR’s back to 2008 on their current form (revised October 2008), and anything older than 2008 can be reported on the FBAR form revised in July 2000.
A spouse having a joint financial interest in an account with the filing spouse should be included as a joint account owner in Part III of the FBAR. The filer should write “(spouse)” on line 26 after the last name of the joint spousal owner. If the only reportable accounts of the filer’s spouse are those reported as joint owners, the filer’s spouse need not file a separate report. If the accounts are owned jointly by both spouses, the filer’s spouse should also sign the report. It should be noted that if the filer’s spouse has a financial interest in other accounts that are not jointly owned with the filer or has signature or other authority over other accounts, the filer’s spouse should file a separate report for all accounts including those owned jointly with the other spouse.
If you are a US person with substantial foreign financial assets, you should know that in 2013, the IRS introduced Form 8938 for you to report with your FBAR’s.
Taxpayers with specified foreign financial assets that exceed certain thresholds ($50,000) must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. The IRS has provided a chart comparing Form 8938 and FBAR requirements, here.
If you need helping getting compliant, or trying to determine your IRS / FATCA plan of action, all you need to do is reach out to us at Intaxicating Tax Services. With 17-years of Canadian tax experience and 30-years of US tax filing, our team will ensure you provide only what you are required to provide.
With a new W9 and W-8IMY on the way and these forms still in draft form in it’s consultation stage, the IRS asks that the existing forms be used and not the new ones yet.
The new withholding certificates effectively divide the information reporting requirements between two classes of payees: nonresident alien individuals and all foreign entities other than individuals.
New W-8BEN will simplify the declarations required to be made by foreign individuals. It will only require basic identifying information, declarations with respect to treaty status (as relevant), and a general certification as to foreign status.
New W-8BEN-E will require each foreign entity to make two distinct declarations:
The foreign entity’s status for purposes of the US outbound withholding tax regime (e.g., the 30 percent withholding tax generally imposed on US-source dividends paid to non-US persons unless reduced by an applicable income tax treaty). This will be the same as the declaration required in the current IRS Form W-8BEN, as last revised in 2006.
The FATCA-related declaration, which will require an entity to provide substantial detail by declaring its overall status for FATCA purposes from among twenty-four different categories (all described in detail in the Proposed Regulations).
In addition, new W-8BEN-E will require a foreign entity to provide its Foreign Financial Institution Employer Identification Number and FATCA ID, as applicable (both are discussed in the Proposed Regulations).
To learn more about the withholding of tax on nonresident aliens and foreign entities, see IRS Publication 515 (2012).
Details on the FATCA Registration Process for Foreign Financial Institutions (FFIs)*
In building an online system for foreign financial institutions (FFIs) to register as participating FFIs, the IRS has developed a flexible system that has the ability for the FFI to create accounts, chose login and passwords, create challenge questions and maintain the account once formed. The automated system aims to make the registration process as quick and easy as possible, facilitates communication electronically and provides e-mail alerts to keep the registration process moving forward.
FFIs will register and enter an agreement (a certification, if a Registering Deemed-Compliant FFI) through an online registration system.
Each FFI must select a FATCA Responsible Officer (RO).
This individual will be identified in the FATCA registration system.
In a typical case, the RO will be the individual who will sign the FFI agreement.
The RO may select Points of Contact (POCs) to help complete all aspects of the registration process except signing.
Up to five POCs may be selected.
There must be at least one in-house POC (may be the RO).
It is anticipated POCs may include certain third-party individuals, both local and US (e.g., service provider).
It is anticipated that there will be power of attorney procedures allowing the RO to delegate full FATCA registration duties (including signing) to another in-house individual.
This in-house individual with the power of attorney from the RO will be identified in the registration system as the FFI’s Authorized Third Party (ATP).
If it proves unworkable for the Responsible Officer (RO) or another in-house individual to register the FFI, it is anticipated there will be power of attorney procedures allowing the RO to delegate full FATCA registration duties (including signing) to certain U.S.-licensed tax professionals that are subject to our regulatory jurisdiction.
The U.S.-licensed tax professional with the power of attorney from the RO l will be identified in the registration system as the FFI’s Authorized Third Party (ATP).
FATCA registration is a user maintained account – it can be edited or modified by the user.
The person signing the FFI agreement (or certification) must make an affirmative statement during the registration process that he or she has the authority to act for the FFI.
Positive ID verification will be required for the individual who signs the agreement/certification on behalf of the FFI.
Person who signs the agreement/certification will be issued a FATCA Individual identification Number (FIIN) following ID verification.
If this individual already has an SSN or ITIN, he/she may choose to use it to obtain his/her FIIN electronically through the registration system If this individual does not have an SSN or ITIN, or does not want to provide his/her SSN or ITIN electronically to obtain a FIIN, he/she must obtain his/her FIIN by filing a short paper form along with a copy of specified ID documentation.
The FIIN is the only identification number necessary for the individual to complete the registration process.
IRS will closely monitor the account creation and FATCA registration process