Table of Contents
SERIES 65 | FINANCIAL REGULATION COURSES
The W-8 and W-9 forms are the two foundational IRS tax certification documents that broker-dealers, investment advisers, and other financial institutions collect from clients at account opening to determine the client's tax status — whether they are a United States person subject to domestic tax reporting and potential backup withholding, or a foreign person subject to the nonresident alien withholding regime — and to establish the correct withholding rate on investment income generated within the account.
Form W-9 — the Request for Taxpayer Identification Number and Certification — is completed by United States persons to certify their taxpayer identification number, confirm their status as a United States person, and claim exemption from backup withholding when applicable.
Form W-8 — a family of related certificates of foreign status, the most commonly encountered of which in the securities industry is Form W-8BEN — is completed by foreign persons to establish their status as non-United States persons, identify the applicable withholding rate on United States source income, and claim any reduced withholding rate available under an applicable income tax treaty between the United States and the foreign person's country of residence.
The W-8 and W-9 forms are directly tested on the Series 65 examination in the context of account opening procedures, tax withholding obligations, the PATRIOT Act customer identification programme, and the Know Your Customer framework applicable to investment advisers and broker-dealers.
The entire W-8 and W-9 framework rests on a single foundational distinction — whether the account holder is a United States person or a foreign person for federal income tax purposes — because this classification determines the entire tax reporting and withholding regime applicable to investment income generated in the account.
A United States person for federal income tax purposes includes United States citizens — regardless of where they reside in the world — resident aliens who are present in the United States under the green card test or the substantial presence test — domestic corporations, partnerships, trusts, and estates organised or formed under United States law — and other persons who meet the definition of United States person under IRC Section 7701(a)(30).
A United States citizen living permanently in France remains a United States person for tax purposes and must complete a Form W-9 rather than a Form W-8 for any United States financial account.
A foreign person is any individual, corporation, partnership, trust, or estate that does not meet the definition of a United States person — nonresident alien individuals who do not meet the green card test or substantial presence test, foreign corporations organised under the laws of a country other than the United States, foreign partnerships, foreign trusts, and foreign estates.
A Canadian citizen living in Canada who opens a brokerage account at a United States broker-dealer is a foreign person who must complete a Form W-8BEN.
This classification is not always immediately apparent from the account holder's name or address — a person with a United States address may be a nonresident alien on a temporary visa, and a person with a foreign address may be a United States citizen.
The W-8 and W-9 certification process requires each account holder to affirmatively certify their tax status under penalties of perjury, creating legal accountability for accurate self-classification.
Form W-9 — titled Request for Taxpayer Identification Number and Certification — is the document that United States persons complete and provide to financial institutions to certify three things simultaneously — their taxpayer identification number, their status as a United States person, and their exemption from backup withholding when applicable.
The taxpayer identification number certified on Form W-9 is either the Social Security number for individual United States persons or the employer identification number for United States business entities — corporations, partnerships, and limited liability companies taxed as corporations or partnerships. The TIN is the foundational number connecting the account to the IRS reporting system — all Form 1099 information returns reporting investment income paid to the account are filed using this number, ensuring that the IRS can match income reported by the payer with income reported by the recipient on their individual or entity tax return.
The certification of United States person status on Form W-9 establishes that the domestic information reporting regime — Form 1099 reporting — applies to the account rather than the nonresident alien withholding regime. A broker-dealer that receives a completed Form W-9 from an account holder treats all investment income paid to that account as subject to Form 1099 reporting — reporting dividends on Form 1099-DIV, interest on Form 1099-INT, and proceeds from securities sales on Form 1099-B — but does not withhold tax on investment income paid unless backup withholding is required.
Backup withholding is triggered under IRC Section 3406 when an account holder has failed to provide a correct TIN, when the IRS has notified the payer that the account holder is subject to backup withholding, or when the account holder has failed to certify that they are not subject to backup withholding. The current backup withholding rate is twenty-four percent of investment income — applied to dividends, interest, and certain other payments when backup withholding conditions are met. A Form W-9 that includes the account holder's correct TIN and the certification that they are not subject to backup withholding eliminates the backup withholding obligation for that account.
The Form W-9 is not submitted to the IRS — it is retained by the financial institution as documentation supporting its tax reporting decisions. The financial institution uses the certified information to file Form 1099 information returns with the IRS and to send copies to the account holder each January for use in preparing their personal tax return.
Form W-8BEN — Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting — is the most commonly encountered member of the W-8 family of forms in the retail brokerage context, completed by foreign individuals who are the beneficial owners of investment income paid by United States sources. Form W-8BEN establishes that the account holder is a foreign person subject to the nonresident alien withholding regime rather than the domestic Form 1099 reporting regime.
A foreign individual who completes Form W-8BEN certifies their foreign status — that they are not a United States citizen and not a resident alien — and provides their country of residence, their foreign taxpayer identification number if applicable, and their date of birth. The form also allows the foreign individual to claim treaty benefits — a reduced withholding rate on certain categories of income under an applicable income tax treaty between the United States and their country of residence.
Without a treaty claim, the standard withholding rate on United States source investment income paid to nonresident alien individuals is thirty percent. This thirty percent withholding rate applies to dividends paid by domestic corporations, interest income — except interest that qualifies for the portfolio interest exemption under IRC Section 881(c) — royalties, and other fixed or determinable annual or periodical income from United States sources. The United States withholds thirty percent of each dividend payment and each interest payment at the source — the paying broker-dealer deducts thirty percent before crediting the net amount to the foreign account holder.
Many income tax treaties between the United States and foreign countries reduce the withholding rate on dividends and interest below the standard thirty percent for residents of the treaty country. For example the United States-United Kingdom income tax treaty reduces the withholding rate on ordinary dividends to fifteen percent and eliminates withholding on portfolio interest entirely for qualifying United Kingdom residents. The United States-Canada income tax treaty similarly reduces dividend withholding to fifteen percent and eliminates most interest withholding. A foreign individual who completes Form W-8BEN and claims a reduced treaty rate — identifying the applicable treaty and the specific treaty article authorising the reduction — allows the broker-dealer to apply the reduced rate rather than the standard thirty percent.
Form W-8BEN is generally valid for three calendar years from the date of signing — a form signed in 2024 remains valid through December 31, 2027 unless a change in circumstances makes information on the form incorrect, such as a change in the account holder's country of residence or tax treaty status.
While Form W-8BEN is the most commonly encountered W-8 form in retail brokerage account opening, the IRS has developed a family of related W-8 forms for different categories of foreign persons and circumstances.
Form W-8BEN-E — Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting — is the entity equivalent of Form W-8BEN, completed by foreign corporations, foreign partnerships, and other foreign business entities that are the beneficial owners of United States source income. The W-8BEN-E is substantially more complex than the individual W-8BEN — it requires the entity to identify its FATCA status, its chapter four classification under the Foreign Account Tax Compliance Act framework, and in many cases to provide additional certifications about its ownership structure and the nature of its income.
Form W-8ECI — Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States — is completed by foreign persons who receive income that is effectively connected with a United States trade or business. Income that is effectively connected with a United States trade or business is not subject to the thirty percent flat withholding rate but is instead taxed at the same graduated rates applicable to United States persons — making the ECI regime more analogous to the domestic tax system than the nonresident alien withholding regime.
Form W-8EXP — Certificate of Foreign Government or Other Foreign Organization — is completed by foreign governments, international organisations, foreign central banks of issue, and certain other foreign tax-exempt entities claiming exemption from United States withholding.
Form W-8IMY — Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain United States Branches — is completed by foreign financial institutions, foreign partnerships, and similar intermediaries who receive payments on behalf of other persons rather than as the beneficial owner. The W-8IMY is associated with withholding statements identifying the underlying beneficial owners and their applicable withholding rates.
The Foreign Account Tax Compliance Act — FATCA — enacted as part of the Hiring Incentives to Restore Employment Act of 2010 and effective January 1, 2013 — added a comprehensive new layer of foreign account reporting requirements that significantly expanded the information collected on W-8 forms and created new obligations for foreign financial institutions holding accounts of United States persons.
FATCA requires foreign financial institutions — banks, broker-dealers, investment funds, and other financial institutions outside the United States — to identify accounts held by United States persons and report those accounts to the IRS either directly or through the tax authority of their home country under an intergovernmental agreement. Foreign financial institutions that fail to comply with FATCA are subject to a thirty percent withholding tax on certain United States source payments — a punishing rate designed to create a strong incentive for compliance with the reporting regime.
The current versions of the W-8 forms incorporate FATCA compliance certifications — foreign entities completing Form W-8BEN-E must identify their chapter four status under FATCA including their Global Intermediary Identification Number if they are a participating foreign financial institution. The FATCA framework has made the W-8 form completion process substantially more complex for institutional foreign account holders than the simpler individual W-8BEN completed by retail foreign investors.
For United States financial institutions including broker-dealers, FATCA requires due diligence procedures to identify whether account holders are United States persons — even accounts held in the name of foreign entities must be examined to determine whether they have United States beneficial owners who should be reported under FATCA.
The collection of W-8 or W-9 forms at account opening is one component of the comprehensive account opening regulatory framework that also includes the PATRIOT Act customer identification programme requirements and the Know Your Customer obligations of FINRA Rule 4512 and the Investment Advisers Act fiduciary framework.
The CIP requirements of the PATRIOT Act — discussed in the USA PATRIOT Act entry of this dictionary — require broker-dealers and investment advisers to collect and verify the customer's name, date of birth, address, and taxpayer identification number before or at account opening. The taxpayer identification number collected under the CIP is the same number that appears on the W-9 for United States persons — for foreign persons, the CIP requires a passport number or other government-issued identification number, which may differ from the foreign taxpayer identification number appearing on the W-8BEN.
The Form W-9 certification of the taxpayer identification number under penalties of perjury provides the financial institution with a legal basis for relying on the account holder's self-certification of their TIN without independently verifying it through IRS records. If the Form W-9 TIN proves incorrect — because the account holder certified an incorrect number — the IRS will notify the financial institution through a B-Notice, triggering backup withholding on the account until the correct TIN is obtained and certified on a new Form W-9.
The Form W-8 certification establishes the account holder's foreign status and applicable withholding rate — allowing the financial institution to apply the correct withholding treatment to investment income without waiting for IRS guidance on each individual payment. Financial institutions that fail to obtain completed W-8 forms from foreign account holders are required to apply the maximum thirty percent withholding rate to all investment income as a default — a rate that may significantly exceed the treaty-reduced rate the foreign account holder is entitled to claim.
A broker-dealer that pays United States source investment income to account holders — dividends on securities held in custody, interest on bonds, and proceeds subject to withholding — is classified as a withholding agent under the Internal Revenue Code, responsible for deducting and remitting the appropriate amount of withholding tax to the IRS on behalf of foreign account holders.
The withholding agent obligation is one of the most significant tax compliance responsibilities of any broker-dealer maintaining custodial accounts. The broker-dealer must determine the correct withholding rate for each payment based on the W-8 documentation in the account — applying thirty percent for accounts without valid W-8 documentation or treaty claims, and the applicable treaty rate for accounts with valid treaty certifications. The withheld amounts must be deposited with the IRS through the Electronic Federal Tax Payment System on a schedule determined by the total amount of tax withheld, and annual information returns on Form 1042-S must be filed reporting each payment to each foreign account holder and the withholding applied.
Errors in withholding — under-withholding particularly — expose the broker-dealer to personal liability for the under-withheld amounts plus interest and penalties, creating powerful incentives for careful documentation collection and withholding rate determination. An investment adviser who also has withholding agent status for client accounts must have adequate procedures for collecting and maintaining W-8 and W-9 documentation and for applying the correct withholding treatment to each payment.
The W-8 and W-9 forms are tested on the Series 65 examination in the context of account opening procedures, tax withholding, the distinction between United States persons and foreign persons, and the broker-dealer's withholding agent obligations.
The key points to retain are these.
Form W-9 — Request for Taxpayer Identification Number and Certification — is completed by United States persons — citizens and resident aliens — to certify their Social Security number or employer identification number, confirm their United States person status, and claim exemption from backup withholding. The W-9 establishes the domestic Form 1099 reporting regime — the financial institution reports investment income to the IRS and the account holder on Form 1099 without withholding tax unless backup withholding at twenty-four percent applies due to missing or incorrect TIN or IRS notification.
Form W-8BEN — Certificate of Foreign Status of Beneficial Owner — is completed by foreign individuals to establish their nonresident alien status and claim any applicable treaty-reduced withholding rate. Without a treaty claim the standard withholding rate on United States source investment income paid to foreign persons is thirty percent — applied to dividends, interest, royalties, and other fixed or determinable periodical income from United States sources at the source before the net amount is credited to the foreign account holder. Treaty claims on Form W-8BEN reduce the withholding rate — commonly to fifteen percent for dividends and zero percent for portfolio interest for residents of treaty countries such as the United Kingdom and Canada. Form W-8BEN is generally valid for three calendar years from the date of signing.
The W-8 form family includes W-8BEN for foreign individuals, W-8BEN-E for foreign entities, W-8ECI for income effectively connected with a United States trade or business, W-8EXP for foreign governments and exempt organisations, and W-8IMY for foreign intermediaries. FATCA — enacted 2010 effective January 1, 2013 — added comprehensive foreign account reporting requirements to the W-8 framework requiring foreign financial institutions to identify and report United States person accounts or face thirty percent FATCA withholding. The broker-dealer's withholding agent obligation requires correct W-8 documentation collection to determine the applicable withholding rate — accounts without valid W-8 documentation are subject to the maximum thirty percent default withholding rate — and annual Form 1042-S information returns reporting each payment to each foreign account holder.
