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If you’re a U.S. company paying foreign contractors, IRS Form W-8 is often misunderstood. Many businesses worry they must withhold U.S. tax just because a contractor is foreign—but that’s not the real issue.
In this video, Dave Horwedel, CEO of Torchlight Tax, explains the critical distinction that determines whether U.S. withholding is even on the table: where the work is actually performed.
You’ll learn:
What IRS Form W-8 is really for
Why foreign status alone does not automatically trigger U.S. withholding
How U.S.-source vs. foreign-source income is determined
When withholding becomes a real risk
Which W-8 form to collect (W-8BEN vs. W-8BEN-E)
How proper documentation protects your business
Key takeaway:
If services are performed entirely outside the United States, withholding is usually not required—but good documentation still matters. If services are performed inside the U.S., even temporarily, withholding rules can apply and must be handled carefully.
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Disclaimer: This video is for educational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional regarding your specific situation.