U.S. person or foreign person?
The W-9 is for U.S. persons: U.S. citizens and residents, and entities organized in the United States (a Delaware corporation owned by a foreign parent is a U.S. person). Everyone else is a foreign person and documents with a W-8. The address on the invoice isn't the test; a U.S. citizen living in Lisbon is a U.S. person and gives a W-9, and a Canadian corporation with a U.S. mailing address is foreign and gives a W-8BEN-E. When in doubt, ask the payee to self-certify: that is exactly what the two forms are.
A foreign person who gives you a W-9 anyway, or a U.S. person who gives you a W-8, creates the wrong form type for the year. If the certification looks inconsistent with what you know (a foreign address on a W-9, a U.S. incorporation on a W-8), ask before you pay.
Which W-8 to collect
| Form | Who | What it does |
|---|---|---|
| W-8BEN | Foreign individuals | Certifies foreign status; claims a treaty rate if one applies (needs a foreign TIN or a U.S. ITIN for a treaty claim on most income). Valid for three calendar years after the year signed. |
| W-8BEN-E | Foreign entities | Certifies foreign status, entity type (for chapter 3) and FATCA status (chapter 4); treaty claim on Part III. The 8-page one; most vendors need only Parts I, III and XXX. |
| W-8ECI | Foreign person with income effectively connected to a U.S. trade or business | Exempts the payment from chapter 3 withholding; the payee files a U.S. return instead. |
| W-8EXP | Foreign governments, central banks, international organizations, foreign tax-exempt organizations | Claims exemption under specific Code sections. |
| W-8IMY | Foreign intermediaries, flow-through entities | The payee is passing the payment through; you may need withholding statements for the underlying owners. |
None of these go to the IRS; you keep them, like a W-9. Unlike a W-9, a W-8BEN and W-8BEN-E expire (end of the third calendar year after signing) unless the payee has provided a U.S. or foreign TIN and nothing changes, so track the date.
Is the income U.S.-source? (usually the whole question)
Chapter 3 withholding and 1042-S reporting apply to U.S.-source "fixed, determinable, annual or periodical" income paid to a foreign person. For most AP teams the decisive rule is this: compensation for services is sourced where the services are performed. A developer in Poland who does the work in Poland has foreign-source income, no withholding, and no 1042-S; you keep the W-8 on file as proof they're foreign and that's the end of it. The same developer flown to your Chicago office for three weeks has U.S.-source income for those weeks. Royalties are sourced where the property is used; rent where the property sits; interest and dividends by the payer's residence.
Purchases of goods are not FDAP income and are outside the regime entirely. Software licenses can be royalties (U.S.-source if used here) or sales, depending on the terms, which is where a tax adviser earns their fee.
Chapter 3 withholding and treaty claims
The default withholding on U.S.-source FDAP income to a foreign person is 30%. A valid W-8 with a treaty claim (Part II of W-8BEN, Part III of W-8BEN-E) reduces it to the treaty rate, often 0% for services and 0–15% for royalties, provided the payee gives the treaty country, the article, the rate and, for most claims, a TIN. Withheld tax is deposited through EFTPS on its own schedule (separate from payroll and backup withholding) and reconciled on Form 1042. Backup withholding at 24% does not apply to a payee who has documented foreign status on a W-8; it applies to undocumented payees you presume to be U.S. persons.
If you pay a foreign person U.S.-source FDAP income and don't withhold when you should, you are liable for the tax, as with backup withholding. If you can't get a W-8, the presumption rules generally treat an undocumented payee as a U.S. person for some payments and a foreign person for others; the safe course is to withhold at 30% until the form arrives.
Form 1042-S and Form 1042
Every foreign payee who received U.S.-source FDAP income during the year gets a Form 1042-S from you, even when the treaty rate is 0% and nothing was withheld, and the IRS gets a copy. The form carries income codes, exemption codes, the treaty country and the chapter 3 and 4 status codes, which is why a good W-8 matters: the codes come from it. Form 1042 is the annual return that reconciles all the 1042-S forms and the deposits. Both are due March 15 (March 16, 2026), and 1042-S must be e-filed if you file 10 or more information returns in aggregate.
Why a foreign vendor on a CP2100 is a filing error
A CP2100 lists 1099s whose name/TIN didn't match. A foreign vendor should never be on a 1099 in the first place, so if one is listed, either a W-8 payee was reported on a 1099-NEC by mistake (the usual case, especially with vendors who have a U.S. address), or a foreign-owned U.S. entity was treated as foreign and should have given a W-9. Sending a B-Notice to a foreign payee asking for a W-9 compounds the error. Fix the classification, file the correct form for the year, and don't withhold 24% on a documented foreign person.
Questions people ask
Does a foreign vendor need a U.S. TIN?
Not to certify foreign status. A TIN (U.S. or foreign) is needed to claim treaty benefits on most income types, and a U.S. TIN is needed for a W-8ECI. Foreign individuals who need a U.S. TIN apply for an ITIN on Form W-7.
We pay a foreign contractor through a payment platform. Who reports?
If the platform is a payment settlement entity, it may issue a 1099-K to U.S. payees and nothing to foreign ones. Your chapter 3 obligation as the payer of U.S.-source services income doesn't disappear because a platform moved the money; get the W-8 and source the income.
Our vendor is a Canadian company with a U.S. subsidiary. Which form?
Whichever entity you contract with and pay. The U.S. subsidiary is a U.S. person (W-9); the Canadian parent is foreign (W-8BEN-E). The invoice should tell you.
What do we keep, and for how long?
The W-8, any treaty documentation, and the 1042-S/1042 records, for at least four years after the due date, plus evidence supporting the sourcing decision (a statement of work saying where services were performed is the most useful document in an audit).