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Sunday, 15 June 2014

How to get a US Tax Number (without tears!)

Once you start getting royalty cheques from overseas sales via the USA fairly regularly, you may want to reduce the amount they grab in taxes. Here are helpful hints from a couple of writers who have been through the process, along with my own experience from this week.
Amazon and Smashwords will charge you 30% withholding tax on your royalties, which is the IRS’s directive, not theirs. But, courtesy of a tax treaty New Zealand has with the US, we can reduce that rate to 5%. Here’s how you do it.

First, you need an EIN (Employer Identification Number) from the US.

Smashwords will suggest you get an ITIN (Individual Taxpayer Identification Number), but based on info I’ve found, you don’t have to. EIN’s cover lots of scenarios, including non-residents earning royalty-type income. Which is good, because an ITIN can take weeks or months to attain, and involves sending certified copies of passports, driver licences etc, to the US. In comparison, I received my EIN in less than twenty minutes, over the phone, with little more information than my name, address, that I was a Sole Proprietor of my business, and that I needed an EIN for Royalty purposes. She even wished me luck with my book! How’s that for service.

To get your EIN, call the following number 001 (267) 941-1099 between 7am and 7pm US time. I made my call at about 10.30am NZ time. I was on the phone for around nine minutes. It was quick and painless. I answered a few questions (which you can see on the IRS form SS-4 on their website), and they gave me my EIN there and then.

In summary:

1. Call the IRS at 1-267-941-1099 (and press 1 on the computerized menu).
2. Tell them you are applying for an EIN for a foreign entity.
3. If they tell you that you need a Form SS-4, hang up and start again. If not…
4. Tell them that you are a sole proprietor (or whatever is applicable).
5. Give your details (name, address, etc.)
6. They will ask if this is for compliance with witholding – say yes.
7. They will ask if this is for e-books – say yes.
8. They will give you your EIN!!!

Go to the IRS website and download or print the following form:

*  W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding

Part 1, Number 3, ‘Type of Beneficial Owner’: Tick ‘Individual’.

Part 1, Number 6, ‘U.S. Taxpayer Identification Number’: Tick ‘EIN’ and type/write your EIN in the space.

Part 1, Number 7, ‘Foreign Tax Identifying Number, if any (optional)’: Leave blank

Part 1, Number 8, ‘Reference Number(s)’: Leave blank

Part 2, Number 9a: Tick the box and type/write New Zealand in the space

Part 2, Number 9b: Tick the box

Leave c, d, and e, blank

Part 2, Number 10, ‘Special Rates and Conditions’: In the space after ‘Article’ type/write the number ‘12’, as in, ‘Article 12’. In the space after ‘to claim a’ type/write the number ‘5’, as in ‘5%’. In the space after ‘(specify type of income)’ type/write ‘Royalty Payments’. In the space after ‘terms of the treaty article’ type/write ‘Citizen and resident of New Zealand’.

Part 3, Number 11: Leave blank

Part 4: Sign, date, and above ‘Capacity in which acting’ type/write ‘Beneficial Owner’.

Once completed, post a copy to:
Amazon Digital Services
Attn: Vendor Maintenance
PO Box 80683
Seattle, WA 98108-0683


And another to:

            Smashwords, Inc.
 Attn: Tax Compliance Dept.

            PO Box 11817
            Bainbridge Island, WA  USA 98110

It can take 30 days or so to hear back from them, in the form of an email, telling you that you are now paying 5% withholding tax instead of 30%.

Royalty payments.

You’ll get your royalty payments sent to you in the mail, by cheque, when you reach $100. They cost very little to deposit in your own bank but do take 21 working days to clear.

Keep writing, keep publishing, and let that passive income roll in!
Good luck!
Bev Robitai

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