W8 Versus W9: The Basics For Business

Some Americans might say that there has never been a better time for businesses to expand, thanks to technology and the free market.

There are several ways in which technology has spurred economic growth. The ease of access to the internet through computers and mobile phones means that there are countless ways to captivate the attention of consumers. Back in the day, advertisers mostly relied on physical media—newspapers, magazines, and billboards—or commercial slots on television. Some entrepreneurs would even orchestrate PR stunts just to get people talking. Today, advertising is calculated, algorithmic, and even discrete. Brands have integrated themselves into the lives of their target consumers, like partnering with a popular social influencer to launch their latest product to that influencer’s large and pre-existing following.

Businesses don’t just leverage technology to communicate with consumers. As the world hung in a global health limbo, the show had to go on. Stock prices of video conferencing software company Zoom skyrocketed. People started to question why they had been commuting to the office all this time. It wasn’t just about social distancing any more. People didn’t want to go back to the office even when health officials allowed society to reopen. Remote work gave people more autonomy, comfort, and free time than ever before.

“In 2023, there were an estimated 64 million people doing freelance work in the United States. This is an increase from 2014, when there were about 53 million people freelancing. The number of freelancers in the U.S. has been increasing since 2014.” — Number of freelance workers in the United States from 2014 to 2023, Statista

Free Man In Front of His Computer Stock Photo

Tax Perspectives On Hiring Remote Staff

Companies have transformed their hiring practices, discovering that, in a competitive world, hiring off-site or offshore can be advantageous for a variety of reasons. Hiring contractors or freelancers, rather than employees, can also lower a company ‘s administrative costs or allow them to access a more diverse talent pool.

For a company whose entire staff consists of employees, expanding through hiring domestic or foreign independent contractors can be an exciting new chapter. In hiring individuals or entities who are not company employees to perform work or services, it is paramount that all parties comply with laws.

Tax forms W8 or W9 must be submitted for Correct ReportingThe W8 and W9 are different tax forms that must be completed by individuals or businesses hired by United States companies. The W8 form certifies that the foreign individual or entity earns income from a U.S. source but does not hold U.S. tax residency. 

What if the contractor or contracted business has no ties to the United States? The contracted individual or entity must fill out a W8 form if they have earned income from a U.S. source. Correct filing of the W8 may also qualify a contractor to claim tax treaties between their country and the U.S.

A W9 form declares U.S. tax residency and provides information including their Taxpayer Identification Number and Social Security Number.

This article provides introductory information on W8 and W9 forms, but it does not replace personalized legal advice. Consult with a licensed tax lawyer attorney to ask questions about your specific case. You can call Hone Maxwell LLP today.

Hone Maxwell LLP