Ross McGill

July 31, 2017|7 Minutes

3 Things To Annoy You About W-8s and 3 Things You’ll Love


The IRS has a chequered history when it comes to the infamous W-8 series of self certification forms now used by almost every financial institution across the globe to categorise their non-US customers. There are three things that annoy us all:

First, they don’t update them all at once, they update them individually at different times. The rules generally allow withholding agents to use the old forms for up to six months after the release of a new form, but this means that financial institutions must keep a close eye on when the new forms are released, then review the new form to determine at what point they will change over to soliciting the new form (usually based on the nature of the change from the old form). With multiple form types, trying to keep up with changes at different times is a complicated, boring, but important task.

Second, they don’t always issue the instructions for the new forms at the same time that they release the new forms themselves. This can be particularly aggravating if you are trying to review a new form for potential changes in policy or procedure or especially for changes in the actual data required to be captured from them.

Third, almost everyone has been collecting these forms as hard copy originals with wet signatures because the only other way to generate ‘electronic’ W-8s was to develop your own software and have the code and its validation rules approved by the IRS – complicated, time-consuming, expensive and only for those institutions with many thousands of W-8s to manage. Faxes used to be allowed (and who on earth uses faxes today anyway?) but only as a temporary stop-gap in the 90 day grace period for receipt of the original. PDFs of W-8s have recently been allowed (and the signature on a .pdf file is technically an electronic signature) but only under certain rules for associating the .pdf file with the email address of the sender on KYC records. Few financial institutions used this facility.

All that just changed, and you probably don’t even know about it yet.

Why not? The IRS typically communicates with ‘foreigners’ using a range of different types of messaging. That includes Announcements, Notices, Revenue Procedures, Guidance, Publications, Instructions as well as emails and system messages within its dedicated portals for QIs and FATCA FFIs. The notable thing here is that the IRS has just made three HUGE changes and there has not been a single Notice or Announcement (yet).

First, the IRS has quietly updated ALL the W-8s. That’s the W-8BEN, W-8BEN-E, W-8EXP, W-8ECI and the W-8IMY. The latest W-8IMY is the June 2017 revision and all the others just got a July 2017 revision date. They did it all at once. So, with a six month grace period, the first occasion that everyone has to start using these new forms will be January 2018. How convenient.

Second, they’ve re-issued all the instructions for the forms, at the same time. Hooray! Guidance at the point of issue, who would have thought?

Third, they’ve added text to the instructions to allow electronic signatures as long as they have a date and time stamp. For those firms that already have on-boarding processes that embed electronic signatures, adding the W-8 series should be relatively easy and offer a massive cost saving by removing print and mailing costs and all the personnel costs associated with managing the hard copies, manual validation and wet signatures.

The reason you might not have noticed all this is that, if you go to the IRS web site today and enter a search term for one of the W-8s (e.g. W-8BEN-E search result), the two or three explanatory lines that accompany the search result have not been changed (yet) and are still referencing the old form revision. So, the search term for W-8BEN, for example, has a description line referencing the January 2017 revision. Its only when you click through the link that you are taken to…the July 2017 revision of the form. The W-8BEN-E description is worse, describing the April 2016 version, but clicking through leads you to the July 2017 version… and so on.

So, sarcasm aside, I know that I rarely say this of any regulator but, well done IRS. These changes will allow non-US financial firms to make some massive cost savings and streamline their operations. It also offers a great opportunity for the small number of vendor firms out there who already offer online W-8 solicitation and validation portals (W-8 Portal). I’ve said it so many times that I think I might trademark it – get the documentation right for the US market and all the other regulatory and compliance obligations become much easier to handle.

It also means that, for firms like ours, we have the joy of updating all our consulting opinions and training materials (training and consulting). Hey ho, always a silver lining.

Ross McGill

Ross is the founder and chairman of TConsult. He has spent over 26 years working in the withholding tax landscape with companies developing tax reclaim software and operating outsource tax reclamation services.

Ross not only sees the big picture but is also incredibly detail oriented. He can make even the most complex issues simple to understand. He has authored 10 books (including two second editions) on various aspects of tax, technology, and regulation in financial services, making him one of the leading authorities in the world of tax.