The ITIN, 30% Withholding, Tax Refund Saga: An Update

4 Jan

Back in November I shared with you the long and headache-inducing adventures that was applying for an Individual Tax Identification Number (ITIN), the magic digits that stop the likes of Createspace, Amazon KDP and Smashwords withholding 30% of everything you earn and passing it onto the United States’ Internal Revenue Service on your behalf. If you need a reminder, it took me eight months, three attempts and countless stress balls—and that was just to get the number. Once you have that, you have to send it to each of your self-publishing companies on a form called a W-8BEN.

As I said back then:

“If you submit your ITIN successfully and use the W-8BEN that has an affidavit on the end, you will be refunded all the money the company has unnecessarily withheld from you so far in the current calendar year. You can see why, despite starting the process in April, I was starting to get nervous as spring turned to summer and summer turned to autumn. Again, I used the instructions on Roz’s Nail Your Novel blog for filling out the form. Make sure you use the proper form – you want the one with the affidavit of unchanged status at the end, which you can find here. You don’t need to include anything with your letter, but you do need to put something in the “Reference” line of the W-8BEN form that will identify you to the company.”

I sent off a W-8BEN to Createspace, Amazon KDP and Smashwords back on November 4th.

On November 16th, I got an e-mail from KDP confirming that they’d received the form. Then on November 29th, RESULT! A cheque from KDP for every last cent they’ve withheld from me since January 1st 2011.

On December 5th, my monthly cheque from CreateSpace arrived—except with some extra. It was my payment for the month, along with all my withholdings from January 1st 2011. Again, RESULT!

So now, in 2011, I had received 100% of all my earnings from CreateSpace and Amazon KDP. But I still hadn’t heard a word from Smashwords. One day I noticed that on my account information page on Smashwords, there was a notice saying they had received my ITIN and my withholding rate was now set to 0%. Great, but what about my refund? I e-mailed them, and yesterday I got this back:

“We do not hold onto the tax withholdings, but send all the withholdings to the IRS when we pay authors.  This means that we collected and paid your withholdings when we sent your last payment. The IRS requires us to send them the withholdings within 10-15 days from the time we pay you.  Unfortunately, we don’t have the withholdings and you will need to reclaim them from the IRS.”

So… no refund from Smashwords. I’m sure what they’ve told me is true, but why is this different with them than it is with Createspace and Amazon KDP? I think my refund is only around $200—I don’t sell a lot on Smashwords, never have—but the fact that it’s a small amount actually makes it worse, because it would have to be a significant amount for me to even consider going through the additional hell of applying to the IRS* for a refund.

Createspace and KDP made it so easy; they gave me back the money straightaway.

So why is Smashwords different? Anyone know?

*I was considering using a service like TaxBack.com until I found out that in order for you to sit back and relax while they take care of everything, you have to sign a power of attorney form and change your address with the IRS. Your only other option is to fill out a bunch of stuff and get them to “prepare” it for you (check, presumably) for which you pay a fee of around a hundred dollars. Considering how priceless I consider an absence of stress to be, it’s just not worth it.

18 Responses to “The ITIN, 30% Withholding, Tax Refund Saga: An Update”

  1. donkearns January 4, 2012 at 09:15 #

    Who would have thought about this one!
    I have added it to my “When published…to do” list .
    Thanks for another great tip Catherine .

  2. Tahir January 4, 2012 at 13:59 #

    What this means is that smashwords has not bothered to go through the process with the IRS of being allowed to withhold taxes. If you file taxes with the US you could easily get the money back even as it is but because you don’t, you made the wise choice to let it go. You’ll sink a lot of time and not see any money (probably about as much as time as it would take to write another book!). In principle now that you have a SSN you could probably start filing taxes as a nonresident in the US and get your future smashwords money back that way (you would have to tell them well ahead of time that you will need a form 1099 or something). But if I remember you’re not with smashwords anymore. No idea what Lulu does.

    • catherineryanhoward January 4, 2012 at 14:17 #

      They won’t be holding any more money because now with the ITIN my withholding rate is set to 0%. But if KDP and CreateSpace gave me back my 2011 withholdings, I don’t see any reason why Smashwords shouldn’t too. It’s too late for me now – there is no way I’m going through any more dealings with the IRS – but maybe they should change the way they do things so it’s easier for other authors in the future.

  3. Melanie Robertson-King January 4, 2012 at 23:15 #

    I’m in the process of applying for my ITIN, What a headache! Application rejected the first time around so another 6-8 weeks before I find out if they liked it this time.

    I’m in Canada and the same thing holds true here. Basically if you don’t live in the US, you need to get the number.

    Another tidbit of info I’ve gleaned from other members of the Ottawa Romance Writers is you have to file a $0.00 tax return every year or it could affect your entry into the US.

    • catherineryanhoward January 4, 2012 at 23:29 #

      Oh for fudge’s sake. Really? Another migraine to add to the list! I don’t even know HOW to file a US tax return.

  4. dirtywhitecandy January 5, 2012 at 11:56 #

    Thanks for the mention here, Catherine – and gnashing my teeth on your behalf over Smashwords! I agree that you’re right to let it go but really it’s not right that you should have to. What else can you do, though?

    • catherineryanhoward January 5, 2012 at 12:09 #

      It’s just such a pain. I had a lot of stress with this process throughout the whole of 2011, but the whole time I was thinking, ‘Well, it’s not that bad because as long as I get it before 31/12/11, I’ll get the money back anyway.’ Not only did KDP and CS give me back all my money, but they confirmed they’d received the ITIN within days of me posting it (Smashwords took weeks) and promptly returned the money. Once I had the ITIN, those two couldn’t have made the process easier. But Smashwords? Not so much…

  5. Shayne Parkinson January 5, 2012 at 19:26 #

    Catherine, at the end of last year Smashwords sent me an IRS form (I’m not near my files at the moment, but from memory it may have been a 1099) showing the total withholding tax they’d sent to the IRS in my name. I attached a copy of that form to my New Zealand tax return, and the full amount was offset against my New Zealand tax owing. As your country and the US also have a tax treaty, you may be able to do something similar.

    I do now have an ITIN (a precious thing, won with much effort), but the treaty with New Zealand only lowers the 30% to 10%, and offsetting that 10% against my New Zealand tax is still going to be worthwhile (I had a very good year!)

    I must say I’ve always found Smashwords excellent to deal with, but I know they had huge headaches figuring out just what should be happening regarding withholding tax.

    Best of luck getting your money back, and Happy New Year!

    • catherineryanhoward January 5, 2012 at 23:03 #

      Thanks for that Shayne – good idea! Offsetting against tax payable here sounds SO much easier that going to the IRS to get it back.

      My question is just why is it different with Smashwords? Why don’t they just use the same system as KDP and CS, which seems to be easier for everybody? Because if SW are sending withholdings to the IRS each time they pay their authors, that in itself must be an administrative nightmare. I’m guessing KDP & CS just sent whatever they didn’t send back once a year.

      Anyways, I’m just glad that I have my ITIN now going forward, and don’t have to worry about this for 2012! :-)

  6. asraidevin January 17, 2012 at 23:39 #

    You no longer need an ITIN, just an EIN for tax exemption. As far as I know, I haven’t heard personally from anyone but here is the info and link.

    SELLING: IMPORTANT UPDATE FOR NON-US AUTHORS
    It’s NO LONGER NECESSARY TO jump through so many hoops to get the 30% tax deduction on all US ebook sales removed. Authors used to have to get an ITIN number which involved several forms, original or certified copy passport presentations and a run of seriously complicated instructions. Non-US authors can now apply for an EIN NUMBER (Employer Identification Number) by phoning the US Embassy in their country of residence. Thanks to blog reader JTR for this information: ”I told them I was a UK based author and they said the EIN was fine, I was effectively the sole proprietor of my own business – I didn’t need to go to the US embassy..”

    http://blackbirdebooks.com/?page_id=2269

    I looked at the EIN application and it says that if you are applying for EIN for tax exemption that ITIN is optional.

  7. Mark January 30, 2012 at 19:10 #

    Thanks for the info. Do Createspace contact you to say they’ve receive the W-8BEN? I sent mine a couple of weeks ago and not heard anything back yet, though I guess it would have to be in writing as they don’t have my email address.

    I’ve been looking for a phone number to contact them (in Las Vegas) but not found anything so far. Anyone have any ideas? Or even an email address of someone there who deals with this? I just want to make sure they have the form before I publish to avoid all the same grief you’ve had.

    Cheers
    Mark

    • catherineryanhoward January 30, 2012 at 19:16 #

      First of all Mark, don’t bother ringing them. I’ve been with CS for two years and I’ve never had to resort to a phone call. And they do have your e-mail address, otherwise you wouldn’t have a CS account. Log in to CreateSpace and look for the “Contact Us” button, which I think is to the left of the page towards the bottom. If you can’t find it maybe go into the Community section and I know for sure there’s a contact or feedback button there. They always respond and they always respond within a day or two. That’s what I did: I e-mailed them re: the W-8BEN and they responded saying they got it.

      • Mark January 30, 2012 at 19:26 #

        Of course they have my email address, yes. Thanks very much. I will check it out. I never even thought to email the form, figured I had to send it by post.

        • catherineryanhoward January 30, 2012 at 19:39 #

          You have to mail the original form to them but you can certainly e-mail them whenever you have to contact them regarding anything.

  8. Pam Crompton November 9, 2013 at 18:34 #

    Oh, heck! I’m dreading it but I have to apply for an EIN and I have to claim taxes withheld by Create Space and Amazon. I’ll also have to contact Smashwords, B&N, etc. because of CS’ EDC program.

    Just so you know, applying on line for an EIN is closed until Tuesday, 12th. That’s how I intend to apply and I’ll let you know what happens.

Trackbacks/Pingbacks

  1. US Tax Withholdings and Alphabet Soup « Catherine, Caffeinated - February 20, 2012

    […] how they got theirs. (Including me.) Plus, whenever you get your number, be it an ITIN or EIN, you get refunded all your withholdings from the year to date, so waiting a few weeks isn’t going to make a difference unless it pushes you into a new […]

  2. Non-US Self-Publisher? Tax Issues Don’t Need to be Taxing « Catherine, Caffeinated - February 24, 2012

    […] way out of a small paper bag, let alone anywhere near an ITIN. Luckily once I had the damn thing, getting my full royalty payments and the money withheld from me in the year to date was easy and qui…. But then, in the last few weeks, people started telling me that I didn’t need an ITIN at […]

  3. Turning a manuscript into an e-book – not as easy as it sounds! « thisisHelenora - May 31, 2012

    […] On top of that, because KDP (and other alternative publishing sites) are US based and I’m a UK resident there are a lot of forms to fill out to prevent them from retaining 30% of non-US author profits. If you’re in the same shoes I strongly recommend reading the following marvellous blog written by Catherine Ryan Howard: Createspace info for UK residents: the US/UK tax treaty. Then make sure you also read this one too: Update on the same saga. […]

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