I’ve just heard from someone about this withholding tax issue. Mentioning no names, her publisher, based in the States, has apparently withheld 80% of her latest royalty, instead of 30%. I can’t say whether there’s anything else affecting this particular case, but if not, that’s totally incorrect.
If there’s anyone else experiencing this kind of thing, I’d recommend you make lots of noise about it to the publisher. If you get no joy, go straight to the top – they usually don’t like bad publicity, and you may get better results that way.
Here’s an issue for all the self-pubbers out there; if you have a book or books selling through Amazon, you’ll have received a message warning you about IRS withholding tax regulations. Briefly, if you don’t register with the IRS, Amazon and any other entities selling your books (and ebooks) in the States are obliged to withhold 30% of your income / royalties, etc. And it’s not easy to get it back from the IRS once it’s been paid in.
Amazon does give you a reasonable set of instructions about how to deal with the issue, but it may not be clear to everybody, especially if you aren’t good at dealing with forms and tax stuff in general, so I’m putting down a few pointers here that may be useful.
First of all, the bad news. You can’t avoid the issue. Sooner or later, if not already, any commercial entity that sells things for you in the States will withhold 30% of your sales income, whatever form it takes – royalties, direct income, whatever. They will pass this money on to the IRS, and they can’t do anything later about getting it back – you would have to deal directly with the IRS, and your (relatively) unidentifiable money (i.e. if you’re not registered with the IRS ) would be difficult to trace.
Secondly, the good news. It’s actually not that difficult nowadays to sort things out, usually pretty swiftly.
What are needed are an EIN number and a W-8BEN form. Once you have the EIN number, it’s inserted into the W-8BEN form, and you make copies of that form, sending one copy to each organisation that you deal with. They can then release all the millions of dollars you’ve made with your Seventy Shades of Grey book! Provided you’re based in the UK, there is an income tax treaty between us and the USA, so in most cases, you won’t need to pay any USA tax. If you’re based elsewhere, the same may or may not apply. Check with the IRS website.
The first step is to get onto the IRS website and download a copy of form W-8BEN. Get all the information needed for the form, fill it in.
Then, phone the IRS (I don’t have the phone number offhand, if you can’t find it or the IRS website, let me know, leave a comment on this article, and I’ll trace it for you).
You can deal with them by snail mail or fax, but the system has been upgraded over the years, and the best way is by phone. You may sometimes have to hold on for ten, twenty minutes, but it’s worth the expense to save you grey hairs. I gather that unless they’re very busy, you may get through pretty quickly.
I have found them to be friendly and helpful. They will take down your details (as needed on the W-8BEN form) and if you have all the answers ready, they will give you an EIN number over the phone. You then complete a clean copy of the W-8BEN form, in fact, make a number of copies, as you’ll need to send / fax one to each organisation you deal with. With Amazon, it’s even easier, you can fill in the details online.
You will normally need to be registered with our own HMRC to take advantage of the income tax treaty with the USA, but everyone is different, I can’t cover all eventualities in a short article.
If you need, I can help with a few general questions about the system, but for more complicated matters, do talk to the IRS people – the feedback I’ve seen is that they are helpful.
Categories: Legal, Links, Money, Uncategorized
Tags: Amazon, Income tax, income tax treaty, Internal Revenue Service, IRS, IRS tax forms, Links, selling books in the USA, stellium ltd, stellium publishing, Tax, USA royalties, Withholding tax