FACTA 8938
Since 2012 the IRS has been employing an additional requirement of disclosing financial accounts and assets held outside the US.
Disclosure via an additional form is required for assets or accounts whose value exceeds:
$200,000 on the last day of the calendar year
Or
$300,000 on any other day.
This does not cancel out the obligation to file the FBAR.
But rather parallels it and is filed with the IRS. The sums differ for US residents and foreigners.
Assets and/or financial accounts are reported according to their maximal fair value measured throughout the year.
Unlike the FBAR, form 8938 also discloses assets and financial derivatives.
Such as options, stocks, bonds, and securities that are kept outside the account
(for instance, a company owner must report the sum worth of his stocks, an employee with options must report his, etc.).
W8-BEN & W9
Every citizen who had recently visited one of the banks or opened an investment portfolio or an investment house,
you were most likely asked to sign either a W8-BEN or a 9W form.
The Financial institutions are forbidden from disclosing any information concerning these forms, primarily due to strict limitations imposed by the authorities.
If you are not sure whether you signed such a form, try and remember if you had been asked for your SSN.
The FACTA agreements require all financial institutions in member countries to report about the American entities
who share an interest in a financial account in the same institution.
An institution which does not abide by these terms may be subject to a tax withholding rate of 30% for the overall income from financial activity in the US.
The W8-BEN and 9W forms were devised to categorize Foreign and American entities as such, for various institutions, including banks, partnership managers, suppliers, etc.
It classifies individuals and separate entities.
The document allows institutions to transfer information to US legislative authorities.
It is also defining the benefits and obligations of the financial institution toward account interest holders.
Thus, for instance, the document can provide one with an exemption from deduction at source for profits for that US entity.
It is important to note that the process of disclosure, from Israeli banks and Income Tax to the IRS had begun in 2016, and by signing this form you permit reporting by the financial institution.
The solution is simple – use the FBAR and IRS Form 8938 to declare the balance in any financial accounts in your name.
Tax4US provides W8-BEN and W9 form-filling services at no extra cost to clients submitting their annual return.
W8-BEN-E
This form categorizes various entities for different institutions in order to deduct at source.
In the case of Israeli institutions, the form is intended to recognize non-US entities which do not require IRS reporting.
For the most part, entities will be categorized into one of two categories:
Passive NFFE – Passive non-financial foreign entity
Active NFFE – Active non-financial foreign entity
Categorization is done according to nature of activities and various income tests.
Once a company is categorized as passive, the institution demands all stockholders who are US citizens to be identified as such.
This section also relates to PFIC classification.