IRS withholding certificates, such as Forms W-8, are critical to documenting your payees and further understanding who you are paying. Forms W-8 provide information about your payee, including their name, tax identification numbers, permanent residence address and treaty claim information. This information is essential to documenting, withholding and reporting on your payees. Without collecting this information, which is best collected upfront and at the time of onboarding, you run the risk of incorrectly withholding and reporting which can result in fines and penalties imposed by the IRS.
This is where retroactive statements or affidavits of unchanged status come in. The terms are used interchangeably and provide payers with a means to cure prior exposure. What is prior exposure? This refers to exposure payers may have for not collecting documentation at all or having invalid documentation file at the time an in scope payment is being made, and therefore not appropriately withholding and reporting on their payees.
Let’s dive a bit deeper into this…
Is There A Standard Format?
No, a retroactive statement or affidavit of unchanged status is a non-standardized document, though each format will typically request the same information. This document can be a standalone document, or included as part of the Form W-8 in question.
Does This Apply to Forms W-9?
No, at this time, the retroactive statement or affidavit of unchanged status cannot be used with Forms W-9.
What Information Is Requested On An Affidavit Of Unchanged Status?
- Print name (as shown on Line 1 of the Form W-8)
- A penalties of perjury statement, declaring that the payee has reviewed the information on the Form W-8 (if this is not attached as part of a Form W-8) and certifies that the information is accurate and valid as of signature date but also remained the same and unchanged for the time period in question before the signature date (Note: you can insert a particular date/time period)
- Signature of the same person who signed and certified the Form W-8
- Date
Conclusion
If you are making payments of US source fixed, determinable, annual or periodical (FDAP) income to non-US persons and you either did not collect Forms W-8 ahead of making the payment or within 30 days of making the payment, or you had invalid documentation on file, then you should consider collecting retroactive statements/affidavits of unchanged status to clear prior exposure.
For additional information on documentation requirements, read our article on how Electronic Form Collection Can Reduce Withholding & Reporting Penalties. Through Comply’s eForms application, you can seamlessly and electronically collect IRS Forms W-8 with retroactive statements, while automatically validating and tracking for form expiration.
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