UK Authors: Don’t Pay US Tax!

This blog post was featured in Carnival of the Indies, issue 19.

Note: this post is specifically aimed at UK authors, but some of it may apply to authors in other countries. I am not a lawyer or a tax advisor. This post reflects my own experiences – it is not professional advice.

If you’re a UK author like me, chances are you sell books via US companies like Smashwords and Amazon. These companies are obliged by the US Internal Revenue Service (IRS) to deduct 30% tax from your earnings. However, the UK has a treaty with the US that means UK citizens don’t have to pay tax to the IRS (you still have to pay tax to HM Revenue & Customs, of course).

To take advantage of this, you need an IRS-issued tax identification number (ITIN). Getting one is quite a convoluted process, so this post is intended to help you get your own ITIN with a minimum of difficulty.

The steps are as follows:

  1. Get a letter from a US company stating that you will be receiving royalties from them
  2. Fill in a form W-7
  3. Send form W-7 and proof of identity to the IRS
  4. Fill in and send form W­-8BEN to each company that you receive royalties from

That sounds simple, but I’ve read some horror stories about how pedantic the IRS can be. It’s worth bearing in mind that the IRS have a vested interest in rejecting your application, since approving it means that they don’t get your tax money. Take care when filling in your application, and make sure you read all the documentation (and this post) carefully.

Get a Letter

According to the IRS’s instructions for filling in form W-7, you need “A signed letter or document from the withholding agent, on official 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“.

To get this letter from Smashwords, you must have accrued at least $10 in royalties. Once you have, you can go to your payee information page, then click the “Request a letter for your W-7″ link to request that they send you a letter by post. It should arrive within four weeks.

Amazon offer a PDF that you can download, fill in and print. I was a little suspicious of that, since the signature has been scanned. This is what I used, however, so it would appear to be good enough. The Tax Information for Non-US Publishers help page in Kindle Direct Publishing has a link to the PDF. Open the PDF, fill in the name and date fields, then print it.

At this point, it is also a good idea to select the “Defer Payment” option on the Smashwords payee information page. When your ITIN is on file, you can select “Pay Me Now” to get your royalties, without the 30% tax deduction.

Fill in Form W-7

The Taxpayer Identification Numbers (TIN) page on the IRS website has a link to a downloadable PDF of the W-7 form, and links to more information. The W-7 PDF can be completed on your computer or by hand. I filled it in on my computer, partly so that I could keep a copy, partly to avoid any issues caused by illegible handwriting.

I read somewhere that you must use blue ink to fill in the W-7, or it will be rejected. If you fill it in on your computer and print it, make sure you use a colour printer so that the parts you have filled in are printed in blue. Also make sure that you don’t use abbreviations (eg enter your country name as “United Kingdom”, not “UK”)

In the “Reason you are submitting Form W-7″, tick boxes a and h. In the Other box, enter “exception 1d royalties”, and enter your country and treaty article number (12 for the UK). See the image below:

Reason you are submitting Form W-7: Click to see full size version

Note that dates must be entered in US format (Month/Day/Year), not Day/Month/Year. In section 6b (Foreign tax I.D. number), enter your national insurance number. In the phone number section, it’s not entirely clear what format it should be given in. I wrote “+44″ in the brackets, then the area code (without the leading 0) and number in the rest of the space. It wouldn’t let me fill it all in on the computer, though, so I had to write it in by hand.

Send Form W-7 to the IRS

You need to send the W-7 form, the letter from Amazon/CreateSpace/Smashwords, and proof of identity to the IRS. I used my passport as proof of ID. Other documents are accepted, but you’ll need two documents if you don’t use your passport. See the IRS documentation for details of what is accepted. It’s a good idea to keep a copy of the letter and the completed form, so that you know exactly what you sent to them should there be any queries.

The IRS will accept a notarised copy of your passport, but it has to be notarised by an officer of the IRS. Luckily, there is an IRS office in the London Embassy. You can visit them in person or post it to them with a covering letter. If you call in person, check the opening times on the website before travel. If you post your passport, post it by Special Delivery. The IRS in London will check your application and let you know if there are any mistakes, then send it on to the IRS in the US if all is well. I got my passport back within a week, and my ITIN letter after about two months.

Fill in and Post form W-­8BEN

Fill in a separate form W-8BEN for each company that you deal with. Make sure that you follow the instructions (PDF version). As an individual, you should put “N/A” in line 2 (Country of incorporation or organization). Put your ITIN in line 6 (U.S. taxpayer identification number), and your national insurance number in line 7 (Foreign tax identifying number).

Smashwords ask that you include your Smashwords username (screen name), CreateSpace ask that you include your CreateSpace Member ID. Put this in line 8 (Reference number(s)).

In line 9, tick boxes a and b and enter “United Kingdom” for the country in part a.

Sign and date in part IV. Enter “Self” under “Capacity in which acting”. Finally, send the form to the US companies that you deal with.

Add Your ITIN to Your Smashwords Payee Information

Go to your Smashwords payee information page, and go to section 3 (Tax Identification). Enter your ITIN in the relevant box, select the “Pay Me Now” option, and click Save. When you next go to that page, the ITIN will not be displayed, but you will see a “Your tax ID is on file” notice to the side of the ITIN box.

Once the W-8BEN form has been processed by Smashwords (this is normally done at the end of the month), your payee information page will have a notice at the top, similar to this one:

Smashwords W-8 Received Notice

Get Paid

Everything should now be set up for you to be paid your full royalties, without a 30% deduction. I found the process convoluted, but didn’t have any problems. If you do have problems, the links below may help.

Useful Links

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About Russell Phillips

I write books and articles about military technology and history. My articles have been published in Television Magazine, Miniature Wargames, Wargames Illustrated and the Society of Twentieth Century Wargamers Journal. I have been interviewed for the American edition of The Voice of Russia.
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10 Responses to UK Authors: Don’t Pay US Tax!

  1. Val Whitter says:

    Very helpful blog to elucidate the labyrinthine IRS. Thank you Russell.

  2. waf107 says:

    Brilliant, Russell – thank you so much for taking the trouble to make it all so detailed. Haven’t sold enuf to use it yet – but it’s been bookmarked!
    Wendy

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  5. waf107 says:

    Hi, Russell. I followed your instructions – went to US Embassy, London, in person in July. Not easy to get thru security. Despite leaving all electronic devices at home (as advised on their website) I had small torch on my key ring so had to deposit this at local pharmacy before being allowed in as it contained a battery! Went to Inland Revenue Services and a very helpful gentleman checked my form W-7 and I offered him my passport. This he foto copied and returned to me saying it would be about 3 months before I received my ITIN number.

    On 15 September I had a letter from the IRS, Texas, asking me to send my passport. I mailed this (via Airsure) immediately and by tracking it I know it was delivered on 24 September – but to date (12 October) it hasn’t been returned. I am very concerned as I need a passport to travel on 27 October. So far I’ve not been successful in contacting IRS in London. I’ve emailed IRS in Texas and await a reply.

    Has anyone had a similar experience and could let me know how long they waited for their passport to be returned?

  6. waf107 says:

    I’m back again. Called IRS in Austin, Texas, this afternoon. Sadly a total and expensive waste of time. Spoke to lady who was very patient and did her best to help, but could only deal with one very short sentence at a time from me. She was able to tell me that there was no way of ever knowing if my passport had been returned!! That department responsible for that had no fone number! And it normally takes 6 weeks to process anyway so not likely to have been returned yet. The blessed man in the London US Embassy should have sent my passport over when I went there in July instead of just taking a copy of it. So utterly pissed off that I feel inclined to go back to US Embassy in London on Tuesday (they don’t open on Mondays) and let them know what a total cock up it all is. Sounds as tho’ I’m unlikely to get my passport back till after Christmas – so will have to cancel all travel plans for the foreseeable future. Perhaps it would cost less to have the tax deducted after all and not bother with an ITIN – just a thought.

    • I’m sorry that you’ve had so much trouble. According to the documentation I read, a copy of your passport is good enough as long as it’s notarised by an IRS officer. As I said in the blog post, I posted my passport to the embassy, and it was returned about a week later.

  7. George Rigby says:

    What happens if I don’t have a passport?

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