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What US Expats Who Receive Form W-9 from a Foreign Bank Should Do



Over the last few years, millions of US expats have been asked by their foreign banks and investment firms to fill out IRS form W-9. Receiving form W-9 often causes surprise or alarm. While there’s no need to panic, there are a number of things that expats should know if they receive form W-9, to ensure that they don’t create any problems in the future.

Why have I been sent form W-9?

In 2010, Congress passed the Foreign Account Tax Compliance Act, more commonly known as FATCA.

FATCA was intended to help prevent tax avoidance, however it has also caused issues for millions of ordinary, law abiding Americans who live abroad.

FATCA compels Americans with foreign assets worth over $200,000 per person (for expats) to report them each year. It also compels foreign banks and other financial firms to report their American account holders to the IRS. Those firms that don’t, face a large tax when they trade in US markets, so that nearly every foreign financial institution now complies.

FATCA requires foreign banks to report their American account holders’ name, address, account details (including balance), and US tax identification or social security number. Form W-9 allows banks to know this number.

Should I fill in and return form W-9?

Expats may receive form W-9 from a foreign bank or other financial firm that they already have an account with, or when applying for a new account.

A form W-9 is used to provide your taxpayer identification number such as your Social Security Number (SSN) or your Employer Identification Number (EIN). – Forbes

They have little choice other than to fill in and return the form, providing their US ITIN or social security number, as otherwise the bank may no longer be able to provide services or an account for them.

The form may relate to personal accounts, or accounts that the US person has signatory authority or another form of control over, such as business or trust accounts.

What happens next? 

After expats have returned form W-9 to the bank, the bank will simply attach the tax identification or social security number to the account, and provide these details to the IRS. They do not send form W-9 to the IRS directly. After expats have returned form W-9 to the bank, the bank will simply attach the tax identification or social security number to the account, and provide these details to the IRS. They do not send form W-9 to the IRS directly.

Then, assuming that the expat is up to date with their US tax filing, including from abroad, that is the end of the matter as far as the bank is concerned.

Many expats though aren’t aware that all Americans have to file US taxes, even if they live abroad, in which case once their foreign bank or other financial firm provides their account details to the IRS, the IRS may decide to write to them asking why they haven’t been filing.

US expats also have further filing requirements, such as FBAR (Foreign Bank Account Report) filing, for Americans who have a total of over $10,000 in one or more foreign bank or investment accounts, including all accounts that they have signatory authority or any form of control over.

Thankfully, there’s an IRS amnesty program called the Streamlined Procedure that allows expats who are behind with their US tax filing to catch up. They simply have to file their last 3 returns and last 6 FBARs as is applicable, and self-certify that their previous failure to file wasn’t willful avoidance.

The Streamlined Procedure also lets expats claim the Foreign Earned Income Exclusion and Foreign Tax Credit, depending on which is more beneficial for their circumstances, which mean most expats won’t owe any US tax, although they still have to file.

Have a question? Contact Katelynn Minott 

Your comments are welcome!

Hugo Lesser

With clients in over 150 countries, Bright!Tax is a leading provider of US tax services to the estimated 9 million Americans living abroad. I’m responsible for client experience, communications, and branding. Since I joined, turnover has been growing at a rate of 80% per annum.

I excel at surpassing competition by disrupting and transforming the playing field through innovation.

4 thoughts on “What US Expats Who Receive Form W-9 from a Foreign Bank Should Do

  1. The post states that expats can “simply file… and self-certify that their previous failure to file wasn’t willful avoidance.” Caveat: There is nothing simple about the Streamlined non-willful certification and they cannot self-certify anything. An experienced offshore tax attorney should assist them in determining if their conduct in not filing was legally willful or non-willful. Filing a cavalier or self-serving non-willful certification can result in the returns not being eligible for Streamlined filing penalty relief, or worse, in the filer being charged with perjury or federal tax offenses.
    Robert S. Steinberg, Esquire
    http://www.steinbergtaxlaw.com

    • Nononymous says:

      Note also that dual citizens, particularly accidental Americans who have no ties to the US, should not enter the streamlined program at all, but should remain non-compliant.

      Expats with only US citizenship are in a more difficult position, and in some cases should consider compliance.

  2. Nononymous says:

    Two points:

    One:

    If the US person lives in a country like Canada with extremely weak FATCA enforcement, where financial institutions do not record place of birth, then they can easily deny US citizenship when questioned. If the bank persists, they can sign a W8, which would be kept on file as proof that the customer is not a US person (and therefore no information about them would be sent to the IRS).

    Two:

    For US persons in less lenient countries who need to sign a W9 to retain banking services, doing so is not necessarily a reason to become compliant. At worst, account information will be sent to the IRS. To date there is no evidence that the IRS does anything with that data. Only in very limited circumstances does the IRS have the ability to collect penalties beyond US borders – and never against dual citizens living in their home countries.

    So while it’s best to avoid the W9 problem by denying US personhood, even if that is not possible there is no need for duals, accidentals and others without US financial ties to become compliant with US tax filing requirements.

    Note also the recent IRS ruling that foreign financial institutions must only “try” to obtain a SSN or ITIN by requesting it once per year. If a customer is unwilling or unable to provide a number (which can be difficult to obtain for accidental Americans who never lived in the US as adults) the bank is still in compliance.

  3. Jean Mammen says:

    Do you need an attorney to complete the non-willful certification form and FBAR for streamlined? Maybe. Maybe not.
    The information on the IRS website is relatively clear, with FAQ on most key points.
    Yes, the cert form does require extensive detail and information about the source of the funds, as well as why you are just now going to file.
    If your situation seems clear to you, and easy to explain clearly, at most you might need a practitioner with experience in this area to review your draft submission.
    On the other hand, if you might make a mess of the explanation, you will need help. The instructions do require you to explain everything – both facts and circumstances in your favor, and ones that don’t look so good. In that situation, you will need expert help. And you might need to move on to OVDP – 8 years and way more onerous.

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