Self-publishing & not in the US? How to EASILY PEASILY avoid that honking 30% tax withholding on your sales
Lulu and Amazon (and I imagine Smashwords) would have you think that you have to jump through hoops of red tape (mental image ahoy!) over months of complicated form-filling to get yourself an ITIN so that you can stop them withholding 30% of your royalties until you settle your tax status with the IRS. Here’s Lulu on the matter:
If you do not have an ITIN and wish to obtain one, you must apply directly with the IRS by submitting the required documents as well as Form W-7 and a letter from Lulu stating that you are, indeed, a Lulu creator (attached below). Please understand that we cannot assist you in this part of the process in any way other than to provide you with the forms and our letter. The IRS is notorious for long, silent delays and unexpected rejections due to overlooked details. Therefore, we urge you to pay very close attention when submitting the required materials in order to avoid the frustrations many Lulu authors have experienced.
BUT NO! There is an easier way! Now, thanks to this glorious blog post (and its by now hundreds of comments), I’ve just sorted the whole thing out within seven minutes. If the thought of doing things such as (gulp) sending off your passport to the States, filling in a gazillion arcane forms, and suffering inexplicable rejections has been putting you off applying for an ITIN, then don’t apply for one.
Do what I did instead – get yourself an EIN, which is just as valid and a gazillion times easier. I’ll not repeat all the differences here – you can read the original post if you want the minutiae – but the biggie for us is that you can get one over the phone. Now, I’m no tax expert, and what follows is just my experience – yours may be different, as you might not get to talk to Miss Moody. This is what I did.
- I called the IRS in Philadelphia on +1 267 941 1099. I used Skype, as it is shedloads cheaper for overseas calls than any normal provider. If you do the same, be sure to use a headset as they will hang up immediately if they think you’re on a speaker phone. I timed my call for just after their office opened (they open at 8:30am Philadelphia time)
- At the computerised menu, I chose option 1 – “Apply for an EIN for foreign entities” and prepared for a long wait on hold. In fact I was answered within seconds.
- I was told that I was speaking to Miss Moody (badge number xxxxxx) and how could she help me? I explained that I was applying for an EIN, and she asked in what capacity was I applying? I told her that I was sole proprietor and owner of the business. That was fine, Miss Moody said, and she would need the following details:
- NAME, ADDRESS, PHONE NUMBER and COMPANY NAME. I occasionally had to spell things for her (such as “Bury”), but I had already prepared for this by writing down what I’d say for each letter (“B as in Bravo, U as in Uniform, R as in Romeo, Y as in Yankee”). Miss Moody seemed to appreciate this. For the COMPANY NAME I told her that I self-published under my own name, which she was happy with.
- “I take it that this is for compliance with withholding?” she suggested. “Yes ma’am,” I smarmed, learning from my American contacts. She then spelled back to me all the info I had given here (I had to correct ‘Bury’!), and then gave me my EIN right there and then. After we had complimented each other’s accent, I ended the call seven minutes after it had started. Now isn’t that better than months of form filling?
Of course, you then have to submit a form W-8BEN to all the people you publish through, but that’s easy too because KDP now have an online tax interview that fills out a form for you. You can then use that as a template for the ones that you have to send to Lulu, Smashwords et al. Just one tip about the KDP interview which was not at all clear for me when I did it – for the question “Do you derive income from treaty benefits?” say NO.
But do read that original blog post if you have any questions. There’s more info there than you can shake a stick at, if that’s your idea of a good time.
Thanks to Mike Manz for pointing me in the right direction in the first place.