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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
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Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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I am a manager for a licensed property company in Texas held

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I am a manager for a licensed property management company in Texas held as a multi-member LLC. Our sponsoring real estate broker is proposing that I sign a settlement agreement with respect to certain in-kind contributions made to a joint venture by a foreign person. I prefer to have a W-9 in our LLC files to protect the LLC from a tax perspective, however my broker states that they file her 1099 at the end of the year and I should have nothing to worry about since the payout comes from the broker, and not our company as a sponsored agent of the broker. Is it not a good proactive measure to request this W-9 or similar form as a way to protect my firm if the IRS were to come after my company for unpaid taxes on dividends/royalties paid to this other foreign person? I just found out she was potentially a foreign person recently (from the nation of Eritrea in Africa) Would such a tri-party agreement be enforceable in the first place if she was indeed a foreign person?

Submitted: 11 months ago.
Category: Tax
Expert:  Lane replied 11 months ago.

NPVAdvisor :

I would agree that it would be a best practice to ask for a w-9 in most situations

NPVAdvisor :

Do you know if this person even HAS an ITIN?

NPVAdvisor :

Have you thought about getting it in writing from the broker that they will do all tax reporting and will absolve you from any liability around tax reporting?

NPVAdvisor :

I commend your protecting the LLC (as you know, you are really protecting the members of this pass-through entity, as the LLC itself does not pay taxes), but I have to wonder if the typical model isn't for the broker here to be the withholding agent)

NPVAdvisor :

Are you there?

NPVAdvisor :

I still don't see you coming into the chat, so Ill provide some general information and then move us to the Q&A mode so you ask any follow-up questions

NPVAdvisor :

Generally, Form W-9 is used to gather information only from US persons and businesses. If you have a foreign person, that person will need to fill out one of the several Form W-8 documents. Forms in the W-8 series are designed to indicate how much, if any, of payments made to a foreign person or business should be withheld for US income taxes. For an overview of these issues, see FAQ for US Withholding Agents on the IRS Web site.

Customer:

Hi, I do not know if the person even has an ITIN.

NPVAdvisor :

Again, if you'd like to provide some m,ore detail (such as how this JV is associate with the LLC

NPVAdvisor :

Ahhh there you are!

NPVAdvisor :

again see this: Generally, Form W-9 is used to gather information only from US persons and businesses. If you have a foreign person, that person will need to fill out one of the several Form W-8 documents. Forms in the W-8 series are designed to indicate how much, if any, of payments made to a foreign person or business should be withheld for US income taxes. For an overview of these issues, see FAQ for US Withholding Agents on the IRS Web site.

Customer:

I overheard a conversation about 2 months back with her mentioning her work visa had expired or something and that she was working with an attorney to resolve it. She told me in person last week she was from Eritrea.

Customer:

I have not thought of that angle in getting the broker to provide a written agreement that they will do all tax reporting and to absolve the LLC from any liability around tax reporting.

NPVAdvisor :

Just to make sure you saw this (our posts keep crossing) Generally, Form W-9 is used to gather information only from US persons and businesses. If you have a foreign person, that person will need to fill out one of the several Form W-8 documents. Forms in the W-8 series are designed to indicate how much, if any, of payments made to a foreign person or business should be withheld for US income taxes. For an overview of these issues, see FAQ for US Withholding Agents on the IRS Web site.

Customer:

Yep, I'm here. =)

NPVAdvisor :

I think, given the non-US person piece, I would ask for the waiver ... especially since tthey've told you not to worry about it

NPVAdvisor :

Form W-9 is used to gather information only from US persons and businesses

Customer:

It's not a formal or "officially" documented JV, just a group activity last year to invest our time in developing a business process for the mutual benefit of broker, and us as agents.

NPVAdvisor :

Yes JV is an informal (maybe better said, overrarching) term

Customer:

I like the idea of requiring the appropriate W-8 series form and/or getting an agreement in writing from the broker that they will do all tax reporting and will absolve you from any liability around tax reporting...

NPVAdvisor :

But gain, given this: "Form W-9 is used to gather information only from US persons and businesses" things might be much more efficiently handled with the waiver ... again, especially as they've told you they'd handle it

NPVAdvisor :

yep

NPVAdvisor :

the probale MAY be again that getting the w-8 will ALSO require a tax ID BUT, you might consider getting the broker to state that they'll do both

Customer:

OK, thank you for the information. Definitely helpful. =)

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3739
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 6 other Tax Specialists are ready to help you
Expert:  Lane replied 11 months ago.

Thanks Shane,

Here's a great reference:

http://www.irs.gov/uac/Form-W-8,-Certificate-of-Foreign-Status

Thanks again,
Lane

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