Collecting IRS tax forms (W-9, W-8 series, etc.) from suppliers and partners is usually an afterthought, at times not even considered until the end of the year when companies begin the 1099 and 1042-S reporting process. In many organizations, the accounting team must email or call that payee and send them a form, which they then fill out and scan then email it back or fax it. Then the AP team records it somewhere. But what happens if that supplier is no longer there or if the relationship isn’t so great any more? What happens if the partner is in a foreign country and has to maneuver the complicated nature of the W-8 series of forms? If you’re located outside of the US, how do you collect local and VAT tax IDs?
The new FATCA requirements instituted by the Internal Revenue Service are designed to collect taxes from entities outside the US, but are also making what use to be a simple handshake relationship into an elaborate protocol involving international treaties. In some cases, the paying company may even need to perform tax withholding. While the risk of not collecting forms prior to payment becomes a potential tax violation.
United States Tax Compliance
All supplier payees are required to fill out tax forms as part of their self-registration on the Tipalti portal.
- For US entities, a W-9 (Request for Taxpayer Identification Number and Certification) is required.
- Non-US entities are required to complete a declaration stating that they are not a “US Person” as per the IRS definitions and are asked to submit the necessary W-8 paperwork.
A premium Tipalti service, approved by auditing firm KPMG, includes the ability to walk payees through a guided tax form selection process. This includes the ability to digitally submit a W-9, W-8BEN, and W-8BEN-E. Tipalti also provides TIN validation on Social Security Numbers and Employer Identification Numbers. For other forms, such as W-8EXP, W-8IMY, W-8ECI, W-4 and Form 8233, a download link is provided as well as the ability to upload a document. This automated process is designed to streamline compliance with the FATCA (Foreign Account Tax Compliance Act) as part of the 2010 Hiring Incentives to Restore Employment (“HIRE”) Act.
Depending on the payee’s country and company structure, Tipalti can also establish the necessary tax withholding.
Tipalti also generates an end of year filing report to submit to the Internal Revenue Service that includes data to generate 1099 and 1042-S tax forms.
Digitally Collect W-9 and W-8 Series Tax Forms
Tipalti solves the complex, highly-manual process of collecting tax information with a guided wizard in the Payee Portal. Payees answer simple questions and are directed to the right form. For some forms, they can digitally complete them which are recording in Tipalti. No printing. No signing paper. No scanning. No filing.
- Guide suppliers with form selection from over eight different tax forms including Forms W-9, W-8BEN, W-8BEN-E, W-8EXP, W-8IMY, W-8ECI, W-4 and Form 8233 during the onboarding process based on their country and business structure
- Integrated TIN validation where Employer Identification Numbers (EIN) and Social Security Numbers (SSN) are automatically verified
- Withholding, when required for specific payees, is automatically performed with each payment
- All payments are rolled up into a year-end report that’s ready to submit to a 1099 and 1042-S distribution service
International Tax Capabilities
For international companies using Tipalti, local and VAT tax ID support is available in 49 countries. Tipalti easily and securely collects the supplier tax IDs and our built-in tax engine validates against 3,000+ rules to help prevent tax ID errors and issues. For European countries, we also support document collection so suppliers can provide additional information needed for tax compliance and self-billing invoices for countries where suppliers must approve invoices before payments can be processed.
Because tax IDs are collected and validated up front, information is vetted in a safe and secure way while ensuring suppliers are legitimate. Tax ID collection is seamlessly integrated into the onboarding experience, so suppliers easily enter the necessary ID, saving time for the AP team. Tax IDs and values are also built in to Tipalti ERP integration bundles, so no manual work is required to input or upload important tax information to ERP systems.
Supported countries are: Argentina, Australia, Austria, Azerbaijan, Belgium, Brazil, Bulgaria, Canada, Colombia, Costa Rica, Croatia, Cyprus, Czech Republic, Denmark, Dominican Republic, Estonia, Finland, France, Germany, Greece, Honduras, Hong Kong, Hungary, India, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, Mexico, Netherlands, Paraguay, Peru, Poland, Portugal, Romania, Russian Federation, Saudi Arabia, Singapore, Slovakia, Slovenia, Spain, South Korea, Sweden, Ukraine, United Kingdom, and Uruguay.