The Internal Revenue Service (IRS) requires all organizations operating in the United States to have accurate tax identification information for reporting on income paid to their suppliers. This data collection process goes for both U.S. and foreign-based entities alike. Maintaining accurate W-series information about your suppliers is critical for fulfilling requirements under U.S. federal tax law and avoiding penalties due to non-compliance.
To fulfill IRS requirements, organizations must manage the process of collecting this information from hundreds, if not thousands of suppliers. As part of this effort, organizations must also be able to validate supplier information such as U.S. Tax Identification Numbers (TIN) or EU VAT numbers, legal names and other entity based classifications for matching supplier provided information with vendor master files.
If you are going through this process, how do you know if you have the right form from a supplier? How can you initiate a process for getting this information back from your suppliers in a timely and efficient manner?
HICX’s Tax Credentialing services help you –
- Cut administration time and cost of collecting paper IRS forms
- Validate documentation through exception management
- Manage inconsistent or incomplete data on existing vendor master data
- Ensure compliance with complex IRS audit procedures
The W-8 series has five potential forms used for managing tax requirements of persons or entities that claim a foreign tax status. These include – W-8BEN, W-8IMY, W-8ECI, W-EXP, and the new W8-BEN-E.
This is just one example of the complexities of the U.S. tax code that can create serious challenges when it comes time to collect supplier information on foreign entities doing business within the United States. Suppliers filling out the wrong withholding form or filling out the right form incorrectly can severely prejudice their rights under the law, while having a direct impact on the requesting organization doing business with that foreign entity.
Moreover, new reporting rules as part of the Foreign Account Tax Compliance Act (FATCA), effective January 1, 2013, are causing increased uncertainty for both requesting entities and suppliers alike. For instance, any requesting entity making a payment of U.S. source income must consider whether it is subject to FATCA since it may apply to both financial and non-financial operating companies. Therefore due to its breadth, FATCA impacts almost all non-U.S. suppliers, directly or indirectly, receiving most types of U.S. source income.
HICX can help you execute the transactional aspects of your W-8 collection by:
- Managing alerts related to W-8 form expirations
- Establishing workflow procedures for ensuring the correct W-8 has been completed
- Managing the collection of the proper W-8 forms based on the entity type
- Validating suppliers against a foreign tax identifying numbers in the EU
- Verifying other information matches which resides in the vendor master
- Ensuring forms are properly completed and signed
The purpose of a W-9 form is to provide an entity that issues taxable payments to a company with the company’s federal tax identification number. The W-9 is only for U.S. citizens, partnerships, corporations, companies or associations created or organized in the United States or under the laws of the United States.
The information that is included on W-9s is also very important because it lets the company writing the check know what kind of entity they are paying, based on a current address and a TIN. Moreover, the IRS uses a W-9 to match revenue that recipients report to the payments that payees report on amounts that are more than $600 throughout the year. Hence, the coordination between requesting organizations and suppliers is a necessary evil to prevent red flags for the IRS due to incorrect fillings.
HICX can help you execute the transactional aspects of your W-9 collection by:
- Managing the collection of the W-9 form
- Verifying form information matches that which resides in the vendor master
- Validating supplier names against the IRS TIN number
- Validating address information against the vendor master
- Verifying forms are properly completed and signed
EU VAT & IRS TIN
One baseline for validating the tax identity of a supplier is through the tax authority under which that supplier operates. Doing this helps verify a supplier’s accounting framework and provides a validation of their legal standing in the country of origin.
The IRS Taxpayer Identification Number (TIN), and the EU VAT, is an identification number used in the administration of tax laws and are critical elements as part of the W-8 and W-9 forms.
In the United States a Taxpayer Identification Number (TIN) is the identification number used by the IRS for the administration of tax laws. The most common forms of TIN are Social Security Number “SSN”, Individual Taxpayer Identification Number “ITIN” and Employer Identification Number “EIN”.
Similarly in the case of the European Union, using a VAT identification number helps validate supplier identity for both EU and non-EU based suppliers. As best practice, it is therefore recommended to validate supplier tax identifiers in managing new and existing suppliers.
HICX can help you complete your W-8 and W-9 processing through IRS TIN and EU VAT validation services that:
- Allow for EIN, ITIN or SSN look up for mismatch by the IRS TIN matching processes
- Validate TIN information related to W-8 or W-9
- Validate supplier identity for both EU and non-EU based suppliers
- Decrease potential of backup withholding and penalty notices
- Reduce the errors in tax identifier validation
- Ensure overall compliance with tax authority guidelines
HICX’s W-8 / W-9 Collection and tax identifier services help you manage the process of collecting W-series information by providing you an easier way to –
- Gather required information from U.S. tax forms both on domestic and foreign suppliers
- Identify which vendors may be missing their W-series form
- Determine what is needed to comply with new or existing legislation
- Establish complex workflows for contacting the supplier to request or update documents
- Validate information on existing master supplier data
- Confirm if forms were not properly filled
- Leverage HICX help desk support for processing completion
Examples of our W-8 / W-9 Collection and TIN Validation Offering
Using HICX Solutions W-8 / W-9 Collection services, you can map the process for understanding how to collect the proper W-series document based on U.S. or EU based suppliers.
- Easily create workflow processes through our workflow designer tool
- Establish email procedures for data collections
- Manage data collection of complex W-series workflow tasks internally and with key suppliers
- Build in signature validation process
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Supplier Data Submission & Review
Using HICX Solutions W-8 / W-9 Collection services, it is simple compare master supplier data information to that collected on the W-series form.
- Easily compare corporate supplier names on tax forms to confirm
- Confirm tax identifiers match
- Validate tax document was signed by the supplier
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Tax Identifier Valdiation
Using HICX Solutions W-8 / W-9 Collection services, easily validate the necessary credentials based on tax authorities in the U.S. and European Union.
- Built-in integration with relevant tax authorities
- Validate supplier information provided in tax forms and stored in vendor masters
- Save time in supplier look-up and verifying supplier credentials
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