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W8
I didn't want to imply YOU were avoiding taxes, but there are some here who would be doing that. Sorry for any misconception.
I used to spend several hours a week dealing with W9s, for groups claiming sales tax exemption from purchases they made with the company I worked for. No W9, no state sales tax exemption certificate for a charitable organization, NO SALES TAX REFUND.
As for TOS, sponsors need to update their TOS and need to explain the shift in IRS policy. Many sponsors sent W9s to foreign based affiliates, as Suzy Bookkeeper didn't know better. She didn't know what a W9 was until told to send them out. She has no clue what a W8 is.
As for keeping affiliates money that is wrong. But the IRS has made it clear, no W8, then you have to withhold and send to the IRS 30%. The affiliate can then file the proper tax forms at the end of the year and ask for the money back. After proof they are a foreign entity, the IRS is required to refund the foreign entity the 30%. If the sponsor keeps the 30% and does not forward the money to the IRS there are sever penalties. Same has US employer withholding. Don't send that to the IRS and they will seize not only the business but all personal assets of the owners. Sometimes they even go after the bookkeepers as "they knew what was going on."
But the question is, do you really want to go to that hassle and possible fines for not filing a W8?
There's idiots in this country who fill out W4s to reflect they will owe zero taxes or have 25 dependents so they will owe no taxes so their withholding on their paycheck is zero. IRS is wise and has a special penalty for that.
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