W-8 vs. W-9: What's the Difference?

Are you a U.S. company expanding your team with contractors? You must master two essential tax forms: the W-8 and W-9. Getting these right from the start saves you from headaches with the Internal Revenue Service (IRS) (and keeps your contractors happy).

Key takeaways:

• Collect W-9 forms from U.S. contractors before their first payment, especially if they'll earn over $600 annually.
• Obtain the correct W-8 form from international contractors to potentially reduce or eliminate withholding requirements.
• Track form expiration dates strategically — W-8s expire after three years, while W-9s last indefinitely unless information changes.

What is a W-9 Tax Form? 

The W-9 form (Request for Taxpayer Identification Number and Certification) is a critical tax document that U.S. businesses must collect from U.S.-based contractors, including U.S. citizens, residents, and businesses.

As an employer, Form W-9 ensures you have all the details necessary to report your contractor payments to the IRS. 

When you hire U.S. residents as contractors, the W-9 form serves several essential purposes:

• Verifies the contractor's taxpayer identification number (TIN)
• Documents the contractor's tax classification and filing status
• Establishes their certification as a U.S. person or entity for tax purposes
• Provides necessary information for 1099-NEC reporting

The taxpayer identification number on a W-9 form comes in two forms: a Social Security Number (SSN) for individual contractors or an Employer Identification Number (EIN) for business entities. This number is crucial because contractors are responsible for their own tax obligations, unlike full-time employees. 

Your business pays contractors the full agreed-upon amount — with no withholdings — and contractors must then calculate and pay their self-employment taxes through quarterly estimated income tax payments to the IRS. Without proper TIN documentation, your business could face penalties for misreporting contractor payments.

The W-9's most crucial function for your business relates to annual tax reporting. When you pay a U.S. contractor $600 or more annually, IRS regulations require you to report these payments using Form 1099-NEC (Non-employee Compensation). 

The W-9 provides all the necessary information for accurate preparation of 1099s, which must be distributed to the contractor and the IRS by January 31 the following tax year. 

Businesses don't file the W-9 directly with the IRS but must keep it on file for tax reporting purposes.

Think of the W-9 as your insurance policy against IRS complications when working with U.S. contractors. This single-page powerhouse does more than collect a tax ID — it's proof that you've done your due diligence in contractor documentation.

What is a W-8 Tax Form? 

The W-8 form is utilized by U.S. companies employing non-U.S. contractors and foreign entities. W-8 forms ensure compliant global contractor payments by establishing a contractor's foreign status. 

The forms also help determine appropriate tax withholding rates under U.S. tax regulations. Without valid W-8 documentation, your business may be required to withhold 30% of payments for U.S. taxes.The two most commonly used W-8 forms for businesses expanding globally are:

• Form W-8BEN: Certificate of Foreign Status of Beneficial Owner for individuals
• Form W-8BEN-E: Certificate of Foreign Status of Beneficial Owner for entities

Obtaining the correct W-8 form can:

• Unlock tax treaty benefits that could reduce or eliminate withholding requirements
• Document your compliance with U.S. tax regulations
• Establish efficient payment processes
• Help your business prepare for year-end reporting

At the close of the tax year, businesses must report payments to non-U.S. contractors using Form 1042-S. The information collected on W-8 forms provides the foundation for accurate international payment reporting and tax compliance.

W-8BEN Form 

The W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting - Individuals) is specifically for individual non-U.S. contractors. When collecting this form, pay special attention to:

• The contractor's country of residence
• Tax treaty claims that might reduce withholding requirements
• The contractor's foreign tax identification number, if required
• Proper certification through signature and date

By default, you must withhold 30% of payments to non-U.S. individuals unless they qualify for reduced withholding under a tax treaty. The W-8BEN helps you determine and document the correct withholding rate. Your contractors will thank you for getting this right!

‍W-8 BEN-E Form 

‍When working with non-U.S. business entities rather than individuals, you'll need to collect the W-8BEN-E form. This more complex document helps establish the entity's tax classification and eligibility to claim tax treaty benefits.

The W-8BEN-E requires more documentation than the individual version, including:

• The entity's tax classification
• Foreign Account Tax Compliance Act (FATCA) reporting requirements
• Specific treaty provisions being claimed
• Details about the entity's ownership structure

Other W-8 Forms 

‍While most businesses primarily deal with the W-8BEN and W-8BEN-E, you should be aware of three other W-8 variants:

• W-8 ECI: Used when a foreign person or entity has income effectively connected with U.S. business operations
• W-8 IMY: Required for foreign intermediaries handling payments on behalf of others
• W-8 EXP: Specific to foreign governments and tax-exempt organizations

Collecting the W-9 or W-8 Form 

‍Make IRS form collection a smooth part of your contractor onboarding process:

1. First, determine your contractor's tax status — U.S. or international? Individual or entity?
2. Request the appropriate form before sending that first payment
3. Review thoroughly for accuracy — especially tax IDs and treaty claims
4. Store securely for easy access during tax season

Implement a system to verify that all required fields are completed accurately before accepting the forms. 

For W-9s, ensure you have the contractor's legal name, business name (if applicable), tax classification, and correct TIN. For W-8 forms, pay special attention to tax residency, treaty claims, and foreign tax identification numbers.

‍How Long Are W-8 and W-9 Forms Valid? 

‍This depends on the form:

• W-9s are valid indefinitely unless your contractor's information changes
• W-8s need renewal every three years 
• Any information changes require immediate form updates

To clarify, W-8s are valid from the date the form is signed until the last day of the third succeeding calendar year. 

For example, a W-8 signed in March 2024 will be in effect until December 31, 2027. Set reminders at least a month before expiration to avoid scrambling for renewals.

‍Pay Your Contractors with RemoFirst 

‍Are you tired of juggling tax forms and compliance deadlines? RemoFirst takes the complexity out of independent contractor management, payments, and documentation in over 150 countries. Our platform:

• Collects and validates required tax forms
• Tracks form expiration dates
• Files 1099-NEC forms for U.S. contractors
• Ensures proper withholding rates for international contractors
• Maintains compliance documentation

Want to give it a try? Our free tier provides access to rapid contractor onboarding, identity verification, contract generation and management, and secure document storage. 

When you're ready to scale your contractor operations, our paid tier enables automated payment processing across 150+ countries and multiple currencies, along with one-click invoice creation and enhanced compliance features. 

With no minimum requirements and custom pricing available for businesses managing large contractor volumes, RemoFirst grows with your needs. 

Don't let tax forms and managing contractor payments slow your global growth. Sign up for our free tier today, or schedule a demo to learn how RemoFirst can transform your international contractor payments and compliance processes.