US Taxes Don’t Need To Be Taxing!

I’m sure many of you have heard about how difficult, time-consuming, and expensive it can be to try and obtain an ITIN (individual tax identification number) from the IRS, which is required to stop Amazon and Co. withholding the required 30% tax from non US authors.

But recently I’ve been hearing about a lot of authors getting an EIN (employee identification number) instead, and it’s been easy peasy! So since I’ve recently set up my own company, I thought I’d put it to the test.

All I did was ring this number: 001 267 941 1099 and answer a list of simple questions about me and the business. Ten minutes later, I was given my EIN over the phone, with a promise to send all relevant paperwork relating to it within the next month. Woo hoo! After that, you just need to send a W8BEN form to Amazon, and any other company you sell through, and they’ll follow the appropriate tax treaty your country has with the US. In my case the UK’s treaty means that my US royalty tax withholdings will be set at a big fat zero! Here’s an example of how to complete the W8BEN form for a company.

Now, as the name suggests, you have to have a business to take advantage of the super-quick EIN hotline, and these are the guidelines stated by the IRS. They mention a corporation or partnership, but I would assume that sole traders would also be eligible to apply. If you are able to go this route instead of having to apply for the dreaded ITIN, I’d definitely go for it. It took me about ten minutes!

Now, getting Amazon to pay non US authors by direct EFT payments into their bank accounts is another story! Unfortunately, even once we’ve got the EIN number, we still have to get paid by paper cheques, which are not only expensive and can take a long time to clear, but which often get lost in the post. I’ve emailed Amazon so many times regarding this issue, and it would be helpful if all non US authors could all do the same. Interestingly, Createspace (an Amazon company) has just started doing EFTs to non US bank accounts – surely Amazon has to follow suit?

So, how about everyone out in WG2E land? Have you managed to get an ITIN trouble-free or did you go for an EIN?

Happy Writing – Sibel XX

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Comments

  1. I’m preparing a similar blog post to help Canadian writers reclaim that 30% ($300 for every $1000 people). I’ve heard from writers that they don’t bother with the hassle and let the 30% go. But it really isn’t that much trouble if you get an EIN–like I did.

    Thanks for the post. If we keep telling people it’s easy, they’ll make the effort. After all, if you’re into this business for the long-term, it’s definitely worth it since several large ‘outlets’ are US-based. And let’s face it; this is just a part of doing business.

    • Sibel Hodge says:

      Great news, Diane, the more people know about this, the better. Not bother with it? Omigod, 30% IS a lot of money! Getting the EIN is no problem, at all, and you’re so right – this is a business, and we need to get our business heads on. :)

  2. D.D. Scott says:

    What a fabulous post, Sibel!

    I had no idea that it was a whopping 30% y’all lost as international Indies! Wow! And this does seem like a viable alternative!

    Go, Girl, Go! And thanks bunches for sharing this!

    I sooo hope B&N opens up soon to International Authors too…oh, speaking of which, does this solution help with getting to use PubIt directly too?

    • Sibel Hodge says:

      I know, it’s a massive amount!

      Unfortunately, this doesn’t help with using Pubit as a non US author because they still require a US bank account. Hopefully, they will also change this rule soon because at the moment we’re unable to go direct. I’m keeping my fingers crossed that Kobo’s new self-publishing platform will allow non US authors to upload direct, and so far the signs look promising. :)

  3. You can apply for the EIN online (no telephone call involved) at:

    https://sa2.www4.irs.gov/modiein/individual/index.jsp

    You can print out the EIN paperwork right onto your own printer.

    Also … international authors who are bringing in enough business with Amazon-US sales to justify the monthly maintenance feel -might- want to consider opening a US bank account with a big international bank (such as Bank of America) that can give you access in both the USA and your home country. Our bank gives you a visa which you can then use in any country to withdraw your money.

    • Sibel Hodge says:

      Apparently, getting a US bank account from other countries is very difficult. I tried recently with HSBC in UK via their international banking dept. The US is now super strict on who they give bank accounts to outside the country and they told me when I applied that my application would probably be refused. It was! :)

      • Sibel Hodge says:

        Re the online application, the IRS guidelines state it’s for: “The online application process is available for all entities whose principal business, office or agency, or legal residence (in the case of an individual), is located in the United States or U.S. Territories”

        So if you’re outside US, I think you still have to make the application by phone. :)

  4. I went for the EIN and you’re right. It was really easy. I wanted to use that instead of my social security number so it was a no brainer. And I can’t believe how hard some of these online bookstores make it for non US citizens.

    • Sibel Hodge says:

      Yep, you’re right, it is pretty hard for us *cue violin* If Createspace has now started doing EFTs to non US bank accounts, and other companies like Smashwords and AllRomance can pay by Paypal, I can’t see what the problem is. Purrrrrlease look into it Amazon! :)

  5. Julie Day says:

    I haven’t earned enough yet to warrent getting one of these. One day though…

  6. I did this too!! I’m also from the UK, though currently living in Australia, and I rang up from here (using Skype) and got straight through. Well, when I say ‘straight’ through, I mean after half an hour on hold of course… but it’s a small price to pay!

    One thing I will say is that they won’t take calls over speaker phone – I had to tell them I was using a headset with my computer, and they weren’t too happy as they could still hear people in the background – my housemates, timing their drunken return from a party about as badly as possible! But the call without Skype would have cost as much as the expected tax break…

    Tell them you’re a sole trader, selling ebooks online through Amazon.com – they’ve obviously heard this a lot before, and know the drill – in fact after I said this, they stopped asking me questions and just got on with it!

    If you get an operator who is being a bit of a pain, or who seems to be asking the wrong questions – or ones you have no answer for – hang up and try again. You’ll get a different operator and have better luck!

    Hope this helps,
    Tony

  7. Kiru Taye says:

    A big thank you, Sibel. I just did it on the phone. It took less than 10 minutes. Absolutely marvellous. :)

  8. I did the EIN form over the phone and it was easy peasy. She was only concerned that I was making money from a US enterprise as a self employed person. i have a day job as well (in Canada) but she didn’t care about that. so easy peasy. In Canada, you can open a US Bank account (not a US Dollar account but an actual American bank account) through the Royal Bank. You need your EIN or ITIN to get it open. Amazon and Smashwords both accept the EIN (with the W8Ben) to pay you without deducting taxes for the US.

    it’s a good time to be a writer indie publishing from Canada.

  9. An EIN is FREE for US citizens (I don’t know about others). I wrote about this back in 08 http://voices.yahoo.com/freelancers-ein-instead-social-1398647.html

    As a freelancer, you really should have an EIN because as soon as you earn more than $600 in a year, the client is required to furnish you with a MISC-1099 form with your income (this takes the place of your w-2) for your taxes at the end of the year. They also file that form with the IRS.

    EINs also make it easy to make quarterly tax payments.

    Also, you can only have 1 employer identification number no matter how many businesses you own. So if you have a writing business, a real estate business, etc it’s all under 1 EIN for tax purposes.

  10. Lukmon Ogunnaike says:

    Hey I am a new author and I was just wondering if an EIN is really that beneficial for someone who only has written one book so far. Should I wait until I have written more or get one now.

    • Sibel Hodge says:

      Well, the way to look at it, I suppose, is if you don’t get it, they’ll be taking 30% tax from you instantly. Even though you’ve only got one book out there, it’s still a lot of withholding. And what if it’s a bestseller? :)

  11. OFF TOPIC, but I’ve got a scoop for you!

    Goodreads now lets authors upload epub files to their book listings! You can make a special 50% of the book ala James Patterson, just the sample, or the whole kit and caboodle. It looks like they are developing a way for authors to sell the books through their site, but as far as I can tell right now there are no royalties collected.

    To do it, sign in and click on your book in your Author Dashboard. In the top right next to Book Stats (another handy tool) click upload ebook. And there you go!

    You can see my listing here: http://www.goodreads.com/book/show/12620569-cancelled
    If you click Download ebook right above Friend Reviews, you get a free full copy of Cancelled.

  12. Tessa says:

    just did it – took 11 minutes!!!! Thank so much :)