W8BEN Question

Posted By: SunnyFL, CRCM

W8BEN Question - 07/07/10 05:49 PM

A recent audit revealed that several W8BENs on file had a US address listed on Line 4 as a "permanent residence address". It was the opinion of the auditor that this must be a foreign address (outside the US)to qualify for non-resident alien status. Many times it is but there are some situations where it is not.

In our particular location we have Canadians who reside here in the winter and go back to Canada for the summer. Most will list their Canadian address as the permanent address and their address here in Florida as the mailing. On the other hand we are also in a very agricultural area and have a large migrant population (6 months of the year) that travel to where ever the work takes them throughout the US - many have given up their Mexican homesteads but are not yet resident aliens or U.S. citizens.

The IRS instructions state "If you are an individual who does not have a tax residence in any country, your permanent residence is where you normally reside."

Many of these folks have had accounts for several years and now the re-certs show a U.S. address - it doesn't ask for the country they are from.

Is the auditor being unreasonable? Would you refuse to open an interest bearing account if they did not have an address outside of the US? How should we handle the existing customers who have interest bearing accounts?
Posted By: Anonymous

Re: W8BEN Question - 07/07/10 07:23 PM

[quote=SunnyFL]The IRS instructions state "If you are an individual who does not have a tax residence in any country, your permanent residence is where you normally reside."


Well, there's your answer.
Posted By: rlcarey

Re: W8BEN Question - 07/07/10 11:26 PM

You cannot have a permanent residence in the US if you are a non-resident alien. These people most likely pass the "substantial presence test" (see the W-8BEN instructions) and need to complete a W-9. This has nothing to do with their legal immigration status and we can guess what that probably might be.
Posted By: Elwood P. Dowd

Re: W8BEN Question - 07/08/10 01:49 PM

Ditto. If they claim to reside in the U.S. then they eventually become resident aliens by operation of law and they cannot execute a W8-BEN. The previous set of W8-BEN instructions was more explanatory, but, in essence, SunnyFl's auditor is correct.
Posted By: SunnyFL, CRCM

Re: W8BEN Question - 07/08/10 05:34 PM

Thanks guys. Seminars I have attended in the past have always advised staying away from the "substantial presence test" discussion but I can see where it definately comes into play in this situation. Our CIP says we don't open accounts without a taxpayer ID number unless they are a non-resident alien so I can see some changes coming. Can't really sign the W-8 cert either if they don't have a number. I appreciate the feedback.
Posted By: rlcarey

Re: W8BEN Question - 07/09/10 01:42 AM

Of course, if you open a non-interest bearing account there is no need for a W-8BEN smile