Can anyone explain Certificate of Foreign status of Benefici

[canman]

My wife is Japanese and owns a condo in Hawaii. She uses a real estate agency to rent out the place and take care of things for her. They deposit the monthly rent and everybody is happy. But today we got a letter from here bank; City Bank of Honolulu, asking her to fill out a W-8BEN, Certificate of Foreing Status of Beneficial Owner for United States Tax Withholding . What exactly is this, does she have to fill it out, is she elligible for this. Does this have anything to do with the war on terrorism? IT seems to be trying to find out who exactly is keeping money in American banks and why? Anyway if anybody has any information about this I would really appreciate it.
Thanks

[maraboutslim]

It's not about keeping money in the banks. It's about making money and paying taxes.

The W-8BEN allows one to:

1. Establish that you are not a U.S. person
2. Claim that you are the beneficial owner of the income for which Form W-8BEN is being provided; and
3. If applicable, claim a reduced rate of, or exemption from, withholding as a resident of a foreign country with which the U.S. has an income tax treaty.


Is she currently paying U.S. taxes on the income she is receiving from the rental property? The bank or real estate company is probably trying to figure out if your wife is subject to taxation and if they are supposed to withhold like 30% as tax or not. I'm not familiar with the tax rules for japanese citizens in relation to rental property income in the us so I can't say if she is supposed to pay tax or is exempt. her property management company should have that information.

-Slim

[samuraiwig]

I'm currently filling out a W-8BEN. It seems straightforward enough, except for the mention that anyone who doesn't have an SSN (which, as a non-U.S. citizen resident in Japan, I don't) should apply for an INIT (Individual Taxpayer Identification Number). Is it really essential for me to get an INIT?

Also, if I need to quote a Japan taxpayer or social security number, where can I find these? I've checked payslips ans my national insurance card, but can't figure it out.

Thanks for any help...

[Taro Toporific]

...anyone who doesn't have an SSN (which, as a non-U.S. citizen resident in Japan, I don't) should apply for an INIT (Individual Taxpayer Identification Number). Is it really essential for me to get an INIT?...

Yep. You aren't supposed to be able to get an W-8BEN without an INIT and there's no way to escape it. Once you need to use the W-8BEN to enter the USA, they will demand it before entry. Even if you try to squeak by now, you are gonna be busted at entry.

F.Y.O.: All you USA FGs out there with Japanese spouses are supposed to get INIT for your spouses when you file 1040 tax return (and you must do that if you earn any Japanese income as a USA citizen). The INIT (Individual Taxpayer Identification Number) system was offline for several years but for the past 1.5-to-2 years ithas been up and running. The IRS is working throught the backlog, but USA FGs with Japanese spouses without an INIT will be busted sooner or later.

[samuraiwig]

Thanks Taro. You half answered my question, but maybe I need to give more background.

I am resident in Japan, and a taxpayer here, but am doing some contract work for a U.S. corporation. I need to file the W-8BEN in order to get paid by them, but when I checked the docs it seemed to be the case that I need an INIT as well. I don't have any plans to actually visit the U.S., just wanna get my money!

[Taro Toporific]

I am resident in Japan, and a taxpayer here, but am doing some contract work for a U.S. corporation. I need to file the W-8BEN in order to get paid by them!

No hope on that either: the U.S. corporation seems need to prove they have an INIT for you on file (if the U.S. corporation's CPA is on the ball). Some multinational (but US) companies don't require an INIT because they can claim you were paid out of a non-US office (typically Hong Kong for us FGs in Japan).

[samuraiwig]

Thanks again...although perhaps not the answer I was hoping for!

I'll check whether this particular company requires the ITIN.

[Taro Toporific]

Thanks again...although perhaps not the answer I was hoping for!

I'll check whether this particular company requires the ITIN.

And/or check whether they are willing to pay you out of one of their foreign, non-US offices.

[maraboutslim]

F.Y.O.: All you USA FGs out there with Japanese spouses are supposed to get INIT for your spouses when you file 1040 tax return

You mean USA citizens living in Japan but filing USA tax returns, right? I filed my first few years in japan (with the $70k or whatever exemption i didn't owe any taxes of course but filed anyway) but then just blew it off. So I never filed USA taxes once married. I never heard a word from the IRS about these "missing years". And of course once we moved here, she just got a SS# anyway.

[kamome]

You mean USA citizens living in Japan but filing USA tax returns, right? I filed my first few years in japan (with the $70k or whatever exemption i didn't owe any taxes of course but filed anyway) but then just blew it off. So I never filed USA taxes once married. I never heard a word from the IRS about these "missing years". And of course once we moved here, she just got a SS# anyway.

If you blow off the filing of your 1040 for a few years but at a later time need to claim a refund, the IRS will withhold your refund until you file your returns for the missing years. It takes the IRS at least 8 weeks to process prior year returns and then extra weeks to process the refund, which means you won't get to see your refund (if any) for a long time. To avoid this scenario, you probably should file the prior year returns even if you owe nothing.

[Taro Toporific]

... I never heard a word from the IRS about these "missing years". And of course once we moved here, she just got a SS# anyway.

Damn lucky! The IRS has threatened many US people I have known with "missing years" with nasty penalties if they have incomes above $70-80,000.