Can You Switch to a Substitute IRS Form W-8?

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As I discussed in my blog post, Tracking IRS Form W-8 Expiration Dates, “Collecting the right IRS W-8 form (W-8BEN, W-8BEN-E, W-8ECI, W-8EXP and W-8IMY) for foreign vendors is more complex than IRS Form W-9...” In addition to the potential for tracking expiration dates, with significant changes in the IRS W-8 forms recent years, they can be difficult to interpret for both the AP team member and for the vendor.   

Does the IRS Allow Substitute W-8 Forms? And Can it Really Help?

Not only does the IRS allow substitute forms, but they even allow the combination of all five W-8 forms into one.  There are very specific instructions dictating content that needs to be included from each IRS W-8 form and requirements and restrictions for vendor certification.

Additionally, you can combine the IRS W-8 forms with an existing form, opening the door to include the information on your current Vendor Setup Form as part of your Substitute W-8 form:  Include additional fields such as:

  • 1042 Form Requirements:  The not-so-new Unique Form Identifier, along with the Income Code, LOB Code and Chapter 3 or 4 Exemption Code and Status Code. For Office Use Only.

  • ·Contact Information: Such as the remit address, or an email address.

  • Other Tax Numbers:  Such as VAT, GST or HST. 

  • Clear Instructions/Determinations:  Do presumptions rules apply? Is withholding required?  Note why/why not. For Office Use Only

Here are some other examples of how it can help with efficiency.  If you create a Substitute W-8 form for just the IRS W-8BEN-E, that form is 8 pages and reducing it to one page, makes it easier for the vendor to complete, and increases the return rate.  If you create a Substitute W-8 form for all forms, now the AP team member does not have to determine which to send to a vendor and the vendor doesn’t have to determine which one to complete.  For those foreign vendors that do not understand the form due to language barriers, your Substitute W-8 form can be translated into another language if an English version of the form is also created. 

What Should You Keep in Mind?

Now that we know Substitute W-8 forms are allowed and there are some significant benefits not only to the AP team but also for the Non-US/Foreign vendor, what else do we have to think about?

  • You may already be using Substitute W-8s.  If you have a Vendor Self-Registration portal that has an interactive W-8 process, that portal technically produces a Substitute Form W-8.

  • They still expire so you will need to track expiration dates. 

  • They must be updated when the IRS updates their versions.  If you have a Vendor Self-Registration Portal, verify with your provider that any IRS updates make it to your portal.  Typically, the IRS gives a 6 months grace period when new forms are published.   

  • Document procedures for the Substitute W-8 form so it can be easily updated when needed.  There is nothing worse that the original creator leaving the team or company with the password to this critical fillable form in their head, or no one checking for IRS updates and you miss the 6 month grace period. 

  • Substitute W-8 forms may not work with all types of payments.  Work with your tax professional to determine if it can be implemented at your company.  

If you think that a Substitute Form W-8 to replace one or all of the IRS W-8 forms may be right for your company, ensure you work with your leadership and/or tax professional.  A good place for you to start your review is this IRS publication: https://www.irs.gov/pub/irs-pdf/iw8.pdf.  

By the way – whether you create a Substitute W-8 form or use the IRS W-8 versions, performing validations on the information collected (IRS TIN Match, OFAC, etc) is another way to validate whether you are working with a real vendor and real vendor data before updating your vendor master file.   

Protect the Vendor Master File from Fraud.  Keep it Clean. 

Helpful Resource:

  • Instructions for the Requester of Forms W–8BEN, W–8BEN–E, W–8ECI, W–8EXP, and W–8IMY (Rev. April 2018): https://www.irs.gov/pub/irs-pdf/iw8.pdf

    • Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding.

    • Form W-8ECI, Certificate of Foreign Person’s Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States.

    • Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding.

    • Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding.

#stayhappy #Vendorsetup #vendormasterfile #accountspayable #w-8

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Debra R. Richardson,

MBA, APM, APPM, CPRS

Debra is an accounts payable speaker, consultant, and trainer with over 20 years of experience in AP, AR, general ledger, and financial reporting for Fortune 500 companies including Verizon, General Motors and Aramark.

For the past eight years, Debra has focused on Global Vendor Maintenance, and implemented a vendor self-registration portal for 140k+ global vendors across five Accounting Systems/ERPs. In her consultancy, she focuses on internal controls and authentication to prevent fraud in the vendor master file.