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| US 30% Withholding Tax |
The Problem: 30% US Withholding Tax
If you are an international publisher/self-published author who sells through US companies then you will have 30% of all the money you make withheld for tax reasons. That's the bad news.
Solution One: An Individual Tax Identification Number (ITIN)
The good news is that if you live in the UK, Canada or Ireland then you can avoid this tax entirely by applying for an Individual Tax Identification Number. There are also a few countries that, while they get some of the tax withheld, can receive most of it back. For a full listing of all countries that have tax exemptions read the document U.S. Tax Treaties--and if you can't get to sleep at night, it's better than warm milk and cookies.
Unfortunately an ITIN is difficult to get, and takes a long time, but it is your only option if you haven't started your own publishing company. Catherine, Caffeinated, has written a detailed article on how to get an ITIN so I'll send you her way: Applying for a US Individual Tax Identification Number (ITIN): A Saga in 3 Parts
Solution Two: An Employee Identification Number (EIN)
If you have your own publishing company then you don't have to go through the rigamorole of getting your ITIN, you can just get an EIN. This is good news.
Again, Catherine, Caffeinated has a great post about this, courtesy of guest David Gaughran. His article is informative and funny. You can find it here: Non-US Self-Publisher? Tax Issues Don’t Need to be Taxing.
Another Problem: Getting Back The Tax That Was Previously Withheld
Now that you have your ITIN, or your EIN, and you've filled out the appropirate forms and sent them to Smashwords and Amazon and whatnot, now you're receving 100% of your earnings (big yea!). But you still have a problem.
You sold a few books while the withholding tax was in place and you'd like to get that money back. As always, there's good news and there's bad news.
The good news: You can get your money back.
The bad news: You can't just ask the retailer (for instance, Amazon or Smashwords) for your back tax, you have to ask the IRS.
While you can do everything you need to get your tax back, many folks would rather pay others to get the job done. If you're amoung that lot (Catherine is), there are companies who will get your tax back for you and charge you either a flat fee or a percentage.
One such company is Taxback.com. Catherine writes about her experience with them and recommends them. Her article is here: The Easy Way to Get Your US Tax Back.
That's it!
When you get your ITIN, or your EIN, and your back taxes have been sorted out, fix yourself a nice tall cool glass of lemonade and relax. You've earned it!
Good luck.
Related reading:
- How To Build A Platform: Why Every Writer Needs A Website
- The Business of Writing: Using Google+
- How To Sell 100 Books Per Day: 6 Things You Need To Do
Just a tip, individuals can also obtain an EIN, not just those with their own company. I went this route and it was wayyy easier. Visit Catherine Caffeinated's post for all the details. Comments on the post are also very usual, giving the country codes and tax treaty rates for all the different countries, as writers discover them.
ReplyDeleteThat's interesting. Here's an excerpt from Catherine's post:
Delete"One final caveat: this [obtaining an EIN number] only applies to self-published authors who are publishing through their own company (and that company must be set up outside the US). While the IRS doesn’t appear to ask for proof that you have actually established your own publishing company, I’m sure there are all sorts of reasons why you shouldn’t commence this process until you actually have."
Sorry, typo, meant to say comments on the post are also very *useful*
ReplyDeleteThat is correct. Some of our customers are trying file their 2290 using EIN and individual name but unfortunately IRS will not accept that combination unless its a business name. We think this scenario applies to some other tax filing areas too!
ReplyDeleteIs EIN is manadatory to File Form 2290 Online?
ReplyDeleteSorry, I haven't looked into this in a while. BUT, I did find this article, "e-file Form 2290," here: https://www.irs.gov/e-file-providers/e-file-form-2290. I hope that helps!
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