NEWSFLASH MARCH 2013 I finally received my IRS number! YAY! I've listed the step-by-step process of how easy it finally was on a new blog post find it HERE
There's no escaping death or taxes.
There's no escaping death or taxes.
In the excitement of publishing my eBook Dancing in the Shadows of Love, I gave no thought to paying tax. Who wants to think of such boring stuff in the soaring joy of seeing your book come to life?
A few days before my eBook went live on Kindle and Smashwords, award-winning Botswana author Lauri Kubuitsile asked me what I'm doing about the IRS tax number. I was brought to earth with a plop.
As I frantically searched the internet for any info on this subject, I found very little information. What I did find is that foreign residents who wish to self-publish in the USA need to sell their soul to the IRS.
Here's what I've discovered so far:
*A foreign author does need a US Individual Taxpayer Identification Number (ITIN) and you need to fill out a foreign residents form applying for exemption. I’ve read on the net that this can take up to FIVE months!
*Some retailers require an ITIN number to set up an account - Apple, for instance.
*Before you apply for an ITIN (which can take 6-10 weeks to be issued), the IRS requires you to include a physical, signed letter or document attached to your application, supplied by the withholding agent (Amazon or Smashwords), on an official Amazon/Smashwords letterhead, showing your name and evidencing that an ITIN is required to make distributions to you during the current tax year that are subject to IRS information reporting or federal tax withholding.
*Without this letter from the distributor, you cannot complete your W-7 application (required to obtain your ITIN from the IRS), and without the ITIN you cannot submit a W-8 form to the distributor (eg Amazon or Smashwords) that will qualify you for reduced tax withholdings.
* To make things more complicated, the IRS instructions are that the distributor’s letter, on letterhead, must be signed in ink by a official of the company (meaning no emailing digital versions of the letter required by IRS - it must be delivered via paper mail and be included with the W-7 ITIN application.) And getting this letter is a mission in itself. Smashwords is far more open to helping authors with this process than Amazon, but even there you need to have earned royalties of at least US$10 before they will issue a letter, which you have to apply for in writing, not via email or fax. The whole process is well documented on the Smashwords site (thanks, Mark Coker!)
*Because of that lengthy delay in becoming official with the IRS, I left the royalty payments section blank on the author royalty forms. On Smashwords, I deferred payment of royalties until I have the necessary tax paperwork completed. I couldn’t load my eBook on Barnes and Noble as they only allow that for a person with a US Bank account but, as I’ve applied for Smashwords Premium Catalogue which distributes on my behalf to Barnes and Noble, Apple etc, that's not a major problem.
For more information go to the US Internal Revenue Service website
And here’s the link to the application form for an ITIN
Once you have that you then need to fill out a W8-BEN form.
Here is the link to instructions for completing the W8 form
As far as receiving payments goes, when I’ve finally got the IRS sorted I’ll be using PAYPAL to receive any funds. It’s by far the easiest way to get paid. In South Africa, any funds I receive via Paypal have to be deposited within one day into a Reserve Bank allocated financial bank, in South Africa, that is First National Bank. I don’t know what the rules are about receiving funds via Paypal in other countries, so you need to check your country's laws for that.
I’m still finding out myself what the procedure is, so if I come across anything major, I’ll post an update on my blog!
As I said...there's no escaping death or taxes. I'm just thankful Lauri Kubuitsile asked the right questions, otherwise I might have found myself answering to the dreaded IRS!
ADDENDUM (6 June 2011)
A reputable publishing source, who asked to remain anonymous for professional reasons, has sent me some further information on the issue of taxes for Non-Resident authors who publish in the USA.
"Yes, it takes up to 6 months for an overseas author to get an ITIN, or the overseas authors simply won't get their royalties. It can be a hassle and a headache, but is a necessary step. The reason LULU does not require an ITIN from overseas authors is because they withold a certain percentage (about 30%) to pay the taxes on behalf of the overseas author. This certainly explains why LULU's prices to publish a print book are so high. And, if you want to sell through their expanded distribution service (Amazon, etc.), you have to get...an ITIN. Imagine that. So, there really is no way around applying for and getting an ITIN unless you want to fork over the 30% of your royalties to the US government (when your taxes probably wouldn't even amount to that, anyway). And, unfortunately, it takes 6 months to get one."
Unless...
"You get a business license in the US. You can choose any state you wish (Nevada has the lowest taxes, so that's a good choice) and apply for a business license in that state. If, for a specific book, you're donating all the royalties to a charity, you can apply for a non-profit organization license and none of the taxes are applied to your other books' royalties or affect your taxes in any way. You will get a business license number at this point, when all of that is completed. When you have that number, you can then apply for an ITIN through your business, and guess what? This can all be done online with no signed-in-ink forms and does not take very long to get. Since you're applying for it as a business, they aren't as picky as if you're just an individual. However, I think there's a yearly fee for a business license.
The easiest thing to do may be to accept paper cheques (or PayPal) and let the IRS take the 30% for taxes."
ADDENDUM 2 (22 November 2011)
Amazon Direct Publishing has finally put up some details about paying tax for non-US resident authors. You find out what Amazon Direct Publishing has to say about tax payments for non US resident authors here
ADDENDUM 3 (4 August 2012)
Here's a helpful blog post on tax payments with well set out steps to follow on the Romance Writers Organisation of South Africa website written in February 2012 by romance author Romy Sommer. You can also find the article on Marketing for Romance Writers.
ADDENDUM 4 (4 November 2012)
I had an interesting chat with South African YA author Joanne McGregor at the recent Sanlam 2012 Youth Literature Award ceremony at Emoyeni. Joanne had previously contacted me about getting a tax number for a non-US resident author and kindly shared with me a very detailed blog post on a short cut to getting that dratted US tax number.
Here is the excellent and detailed blog post by Irish author CATHERINE RYAN HOWARD on an easier way to get a US tax number for Non US resident authors.
The many comments on Catherine's blog are worth reading too.
Joanne followed these steps and said it took her less than an hour to get her US tax number via Skype.
Any further info I find out about taxes and non-resident authors I'll continue to add here.
DISCLAIMER: I must be more brainwashed about tax after 20 years with my hubby Dr Beric Croome than I realised. My idea for this tax article was all my own - a middle of the night brainstorm! - and it's all my own research too (one doesn't get free advice from tax lawyers, I'm afraid, not even when you're married to one!!!) :)
ADDENDUM (6 June 2011)
A reputable publishing source, who asked to remain anonymous for professional reasons, has sent me some further information on the issue of taxes for Non-Resident authors who publish in the USA.
"Yes, it takes up to 6 months for an overseas author to get an ITIN, or the overseas authors simply won't get their royalties. It can be a hassle and a headache, but is a necessary step. The reason LULU does not require an ITIN from overseas authors is because they withold a certain percentage (about 30%) to pay the taxes on behalf of the overseas author. This certainly explains why LULU's prices to publish a print book are so high. And, if you want to sell through their expanded distribution service (Amazon, etc.), you have to get...an ITIN. Imagine that. So, there really is no way around applying for and getting an ITIN unless you want to fork over the 30% of your royalties to the US government (when your taxes probably wouldn't even amount to that, anyway). And, unfortunately, it takes 6 months to get one."
Unless...
"You get a business license in the US. You can choose any state you wish (Nevada has the lowest taxes, so that's a good choice) and apply for a business license in that state. If, for a specific book, you're donating all the royalties to a charity, you can apply for a non-profit organization license and none of the taxes are applied to your other books' royalties or affect your taxes in any way. You will get a business license number at this point, when all of that is completed. When you have that number, you can then apply for an ITIN through your business, and guess what? This can all be done online with no signed-in-ink forms and does not take very long to get. Since you're applying for it as a business, they aren't as picky as if you're just an individual. However, I think there's a yearly fee for a business license.
The easiest thing to do may be to accept paper cheques (or PayPal) and let the IRS take the 30% for taxes."
ADDENDUM 2 (22 November 2011)
Amazon Direct Publishing has finally put up some details about paying tax for non-US resident authors. You find out what Amazon Direct Publishing has to say about tax payments for non US resident authors here
ADDENDUM 3 (4 August 2012)
Here's a helpful blog post on tax payments with well set out steps to follow on the Romance Writers Organisation of South Africa website written in February 2012 by romance author Romy Sommer. You can also find the article on Marketing for Romance Writers.
ADDENDUM 4 (4 November 2012)
I had an interesting chat with South African YA author Joanne McGregor at the recent Sanlam 2012 Youth Literature Award ceremony at Emoyeni. Joanne had previously contacted me about getting a tax number for a non-US resident author and kindly shared with me a very detailed blog post on a short cut to getting that dratted US tax number.
Here is the excellent and detailed blog post by Irish author CATHERINE RYAN HOWARD on an easier way to get a US tax number for Non US resident authors.
The many comments on Catherine's blog are worth reading too.
Joanne followed these steps and said it took her less than an hour to get her US tax number via Skype.
Any further info I find out about taxes and non-resident authors I'll continue to add here.
DISCLAIMER: I must be more brainwashed about tax after 20 years with my hubby Dr Beric Croome than I realised. My idea for this tax article was all my own - a middle of the night brainstorm! - and it's all my own research too (one doesn't get free advice from tax lawyers, I'm afraid, not even when you're married to one!!!) :)
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