Thursday, 23 August 2012

Book Publishers, Non-American Authors and the IRS

If you self-publish your books (whether eBooks or physical books) using an American publisher (Amazon, Smashwords, CreateSpace or whoever) it may be a surprise for you to learn that the American tax office (the IRS) requires the company you publish with to withhold 30% of your royalty earnings. Yes, that's right, non-American authors who publish with Amazon or any other American company will have 30£ of their royalties withheld directly by the IRS. This is a big chunk of money to lose every month, especially by a foreign tax office (and you still have to pay income tax at home). But all is not lost. Most countries have a tax agreement with the USA and if you take a few simple steps you can stop the IRS from robbing you blind. What you need to do is to get a tax identification number from the IRS. Not being an American citizen, this can either be an ITIN (individual tax identification number) or an EIN (employer's identification number). Now, any American reading this will be stunned that an individual can get an EIN, because domestically, these are always reserved for limited companies. For non-Americans though, these numbers can be used by a sole trader — a category into which authors fall. Now the ITIN process requires that you send your passport and a letter from your employer (Amazon or whoever in this case) to the USA or to an American embassy in your home country. This is because these numbers are intended for individuals and the IRS needs to confirm who you are. But, not being an American you can apply for an EIN number and the application for this is much more straightforward, as you do not need an ID. Indeed, all you need to do is to call a specific number at the IRS which directly issues EINs for foreign applicants only. It might sound an expensive process, as you are calling the US, but if you use Skype you can keep the costs down and you will have the all-important number by the end of the call. The number I used was +12679411099 and though I had to wait almost 30 minutes to get a reply, the woman who eventually answered took me through the entire application process. By the end of the call I was told my EIN and I was sent a letter to confirm, which arrived a few weeks later. Now that I had my tax ID I could get form W8-BEN, which is available for download from Amazon and CreateSpace. I filled this in and mailed it (you need to send a wet ink copy) to the address Amazon provided (the address is available form the self publishing help pages). A few weeks later and I received an eMail from Amazon saying that everything was in order and that I would no longer have any tax withheld from the US side. And once you have your EIN you can use it with anyone you publish with in the US. A single phone call (which cost less than 50p with Skype) and a few letters and I saved a huge chunk of money. It really is easy and there is absolutely no reason for you to let the US IRS keep any of your hard-earned royalties. What I am surprised is that most of the information on the web talks about the ITIN number, which is a rather involved process, when for anyone not an US citizen getting an EIN is a much, much, easier process.

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