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digitalstorm · Sep 12, 2006, 08:20 AM

Hi.

I am helping some friends with a W-8BEN form. They have received their ITIN numbers and this is the next step. Previously, I was here asking about W-7 advice and it worked out very well, so now I'm asking about the W-8BEN...

On Line 11: What does one do there? I simply have no idea what "notional principle contract" are. Can you shed some light about what is going on with this line?--reasons for checking or not checking the box? I've read the form's instructions and searched on the net, but simply cannot find any info that helps.

Thanks.
-gabe

AtlantaTaxExpert · Sep 12, 2006, 07:08 PM

If your friends are earning income that is NOT connected with a trade or a business in the United States (such as income earned in their home country, gambling proceeds, broker proceeds, short-term interest, bank deposit interest), then it is NOT subject to U.S. income taxes.

By checking off Line 11, Part III, you agree to identify these sources of income.

digitalstorm · Sep 13, 2006, 10:11 AM

Thanks for your response.

If you don't mind, I'd like to illustrate this particular case a bit more and see what you think should be done...

These guys (from Sweden, Holland, Italy, etc.) will be making music royalty money that comes around after music they've written has aired on television. But it's a bit indirect... what I mean is that they wrote music for our company and our company has hired a distributor that licenses music to clients like TV networks and shows. Once the music has aired, it garners a royalty that some time later is collected by BMI because the composer is affiliated with them. Then, BMI pays the royalty to the composer. As far as I know the IRS considers music royalties to be passive income.

So, I guess the final question is if you're filling out a W-8BEN, and it's so you can join a music royalty collection company like BMI or ASCAP, do you check the box or leave it blank?

And if you check the box, then what kind of statement do you need to provide? Just a note from the person? Or something more official?

Thanks.
-gabe

AtlantaTaxExpert · Sep 15, 2006, 04:38 PM

Check the box.

A signed memo to the IRS.

digitalstorm · Sep 18, 2006, 06:48 PM

Thanks. You really provide a wonderful resource here. I really appreciate it.

Cheers.
-gabe

AtlantaTaxExpert · Sep 19, 2006, 05:25 PM

Glad to help!