US Tax Withholdings and Alphabet Soup

20 Feb

[UPDATE: Please make sure to read the comments on this post too, as fellow Irish self-publisher David Gaughran explains how he got his EIN—in minutes.]

[UPDATE #2: Author Melissa Hill advises me that Irish residents might be better off contacting the US Embassy in London. I guess it doesn't matter which embassy you contact anyway, but it seems that London is better equipped to deal with these kinds of applications/enquiries than the Dublin one is.]

[UPDATE #3: Commenter Janet advises that starting this year, new IRS rules will mean that companies such as CreateSpace, etc. WON'T be able to refund withholdings from the current year. That will mean that any monies withheld will go straight to the IRS, and you'll have to apply to them to get the refund. If getting an EIN/ITIN is rocket science, filing tax returns with the IRS when you don't live in the US is string theory and chaos theory combined; my advice would be to get your EIN or ITIN before you're due a single royalty cheque, if possible.]

You may recall that before Christmas I posted about the saga of obtaining a US Individual Tax Identification Number (ITIN) so that I could receive my royalty cheques from the likes of Amazon, CreateSpace and Smashwords without them withholding 30% from me, which is what they’re obligated by law to do if there’s no tax information provided. Since then there’s been a couple of comments left on the post saying that self-published authors outside the US don’t need an ITIN, only an Employer Identification Number (EIN), and EINs are far, far easier to get.

I’m certain this is true, not only because of the commentors but because I know writers who aren’t self-published who use it for things like getting paid for features from US publications. I’m not an expert but this is the way I think it works:

An ITIN is for earning royalties in the US as a non-US resident. Let’s say you were published in the US by Penguin Books, for example. Other companies are distributing the book to stores and websites, and Penguin are collecting the money because the book is their product, and you’re entitled to royalties from each sale. To get paid them, you need an ITIN. But with a self-published book, the product is yours. Amazon KDP, CreateSpace and Smashwords are just distributing it and then paying you; there’s no middle man, no entity in between who can claim it’s their product. The royalties are really just profits. Thus you are just doing business in the US. You’re just selling a product. And in order to get your 100% instead of seventy, you merely need an EIN.

So how do you get an EIN? You can apply online at the IRS website, although it’s a “live” application service and so can only be used during certain times of the day (specified on the site). You also apparently have the option of phoning your nearest US Embassy where you might end up with your EIN before you hang up the phone.

You may have to, ahem, pretend that at some stage in the future you might take on some staff…

(Well, when you start selling a gazillion e-books a second, you are going to need an assistant, right?)

What if you have an ITIN? Well, like me, you’ve just done some form filling and IRS-stressing you didn’t really have to, but hey, it’s done now. It’s not wrong to have an ITIN, it’s just you could have got an EIN instead. The people who know this seem to be freaking out all over the interweb, leaving excitable public service announcements on other people’s blogs to alert them, and while I love when useful information is shared, I don’t really see the need for a full-on freak out about this. Getting an ITIN is not difficult—what is difficult is trying to do it with the information the IRS provide, and you don’t have to because plenty of self-published authors have blogged about 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 calender year. My point is, calm down.

If you have an ITIN, you shouldn’t even be reading this because your tax situation is already sorted. (But of course I’m glad that you’re here!)

If you’re in the processing of applying for it, just wait. You’ll get all your money back anyway.

But if you haven’t started the process at all, get on the phone to your nearest US Embassy or follow the link to the online application, and then come back and tell me how you got on.

49 Responses to “US Tax Withholdings and Alphabet Soup”

  1. Steven Lewis February 20, 2012 at 09:39 #

    God bless you for still blogging about this. My standard answer at presentations when asked about withholding tax is: “Catherine Ryan Howard” has gone through this and writes about it extensively.

    I’m so glad we had a company to go through. The personal alternative sounds hellish.

    • Steven Lewis February 20, 2012 at 09:40 #

      My “” went awry there with the closing mark coming a touch too soon. I don’t normally put your name in quotation marks! :)

  2. Dianne Greenlay February 20, 2012 at 17:44 #

    Catherine, as a Canadian author, I, too, had the nightmare of applying for an ITTN. After the third time and a trip to the US embassy in a major city that is an 11 hour roundtrip drive for me, I got it! Twice I had been given incorrect information over the phone by two different IRS agents but the 30%, I’d hoped, was going to be a significant amount of money to be worth all of the hassle. Got mine before you did your postings on that topic but wish I’d had your advice to help me sort through it. Thanks for helping all of us out here by continuing to share your knowledge and experience!

  3. Dianne Greenlay February 20, 2012 at 17:49 #

    BTW, I have been asked to be keynote speaker at a small writers conference this spring. They are traditionally published writers who are interested in hearing about the indie route and getting advice on how-to-start with it. I am using both your site and Steven Lewis’s site in my “must-follow-if-you-want-to know-stuff-about-this” list. :-D

    • Steven Lewis February 20, 2012 at 22:24 #

      Thanks, Dianne :)

      • Dianne Greenlay February 20, 2012 at 22:32 #

        Thank YOU Steven for sharing all the information that you do on The Taleist. I was just over on your site and reading the prelim’s of your survey. Can’t wait to see the full results. I hope to be sharing that info with the writers group, too.

  4. Sally Clements February 21, 2012 at 00:56 #

    Very interesting info, Catherine! As you know, I’ve got my ITIN, and am glad to know I don’t have to get anything else (phew). It’s also handy to know that if you’re doing both self publishing and publishing with an American publisher/selling in US, the ITIN is good for both…

  5. authorsanon February 21, 2012 at 09:58 #

    This will be a huge help to those starting out in self-publishing – not everyone gets to see all the info they need before getting caught up in all the paperwork and stress. I think many people will be really grateful you shared this.

  6. David Gaughran February 21, 2012 at 12:45 #

    Hey. This is interesting. I tried the online form, but then I got to a point where it asked me for me SSN or ITIN – which I obviously don’t have. I’m going to try the calling the local US Embassy route later, and will let you know.

    • catherineryanhoward February 21, 2012 at 12:52 #

      Thanks David. I’m very interested to hear how you get on. One of the commenters on the other post said you might encounter people who don’t know what you’re talking about, but when you find someone who does, you’ll be able to get your EIN over the phone. I think it sounds a bit too good to be true but let’s see!

      • catherineryanhoward February 21, 2012 at 12:53 #

        By the way thanks for the mention on your blog post about paperbacks!

        • David Gaughran February 21, 2012 at 14:44 #

          No problem, it was the most concise, clear summary I’ve seen, and it really helped me pick my trim size – which is the big stumbling block at the start, after which everything starts to fall into place. Your notes on front/back matter were excellent to, as well as the advice on blank pages etc.

    • asraidevin March 3, 2012 at 06:34 #

      The SS-4 says that ITIN/SSN is optional. They have instructions for filling out the form for folks who are wanting to comply with withholding regulations. Amazon has info on their W8BEN page as well on the SS-4.

  7. David Gaughran February 21, 2012 at 15:04 #

    Ok! I got my EIN over the phone. It works! I’ll try and lay it all out clearly.

    Unless your publishing company was incorporated in the United States, you cannot apply online. Here is the quote from the online EIN application page:

    “If you were incorporated outside of the United States or the U.S. territories, you cannot apply for an EIN online. Please call us at 267-941-1099 (this is not a toll free number)”

    A word of caution. I called on Skype, and the lady asked me if I was on a speakerphone, and said that they are not permitted to take calls from people on speakerphones. I had to scramble around my apartment to look for my headphones and got cut off – so have them plugged in before you call.

    When I called back, a man answered and told me I needed to fill out Form SS-4. You DO NOT want to do this (it involves confusing forms, and faxing, and delays etc.), so thank him, hang up and call again. You will likely get someone else. It appears to be 50/50 whether they will give you the EIN over the phone, or whether they will try to make you fill out this form.

    I got lucky when I called back, and the lady took my details (name, name of publishing company, type of company – I’m a sole proprietor, address, phone number, country company was incorporated in). She then asked if I need the EIN for compliance with witholding, I said yes. She asked if it was for e-books, I said yes. Then she read back my information, then issued the EIN right there over the phone. It took about ten minutes, the whole time of which I was contorted into a ridiculous position, simultaneously holding the wire of my headphones at the one exact angle where I could hear her speak, and bent in the other direction to try and reach the tiny mic on my laptop!

    In summary:

    1. Call the IRS at 1-267-941-1099 (and press 2 on the computerized menu).
    2. Tell them your 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!!!
    9. Now, tattoo it on your ass and wear it with pride.

    • catherineryanhoward February 21, 2012 at 16:43 #

      EXCELLENT! And thanks so much for laying it all out so clearly. I might copy it into another update post if you don’t mind. Love the hang up and call again!

      Now quick, give it to KDP & friends and get your money back!

      • David Gaughran February 21, 2012 at 17:40 #

        Feel free to use as you please.

        Oh, it’s totally in the mail already. Now I can add “check the postbox” to checking my sales and all the other wonderful things that make up my daily procrastination routine!

    • ihatemoneylaundering February 22, 2012 at 15:17 #

      David: mwah mwah! That’s me kissing you, because I followed your instructions to the letter and am now sitting here staring at my very own EIN. It is a thing of beauty, as are you, and the nice Mr Newton at the IRS. EIN, I love you!

    • Lassal April 5, 2012 at 14:29 #

      Catherine & David,

      that was such a good suggestion. I read this post and David’s comment, picked up the phone right away, dialed 001-267-941-1099 and 5 minutes later I had my EIN. 4 of the 5 minutes was waiting in the line.
      :)

      So I can throw my to-do list for the ITIN away, and gladly so!

      BTW I did this from Germany and yes, they asked me for a SS-4 first but I said I did not have any. Then they asked me if I had the blank form, which I also denied. So we went ahead without it. Was not a problem.

      You two just saved me a lot of time and hassle. Thanks a lot for this!

    • Paul Kater (@pagan_paul) February 14, 2013 at 17:39 #

      I just gave it a try. Wait time too long so I’ll try again, but note that the menu has changed, the number you need to use on the system is now 3.

    • Saba March 12, 2013 at 20:29 #

      I followed your instructions to a T and it worked exactly as you said. I’m heading to the tattoo parlor ;o).

      For anyone else, Amazon also have a write up with more information here: https://kdp.amazon.com/self-publishing/help?topicId=A1VDYJ32T5D3U4 however the 8 steps above work perfectly.

  8. Jo Carroll February 21, 2012 at 17:45 #

    Thank you for this – I’d given up trying to get an ITIN, as they were insisting I travelled across the country to an Embassy, which – given that I have no car and a life – is not straightforward. But this looks possible – thank you – and David. It looks almost straightforward.

  9. Janet Grunwaldt February 21, 2012 at 21:09 #

    “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 calender year.”

    Please note that IRS is making changes starting this year, businesses such as KDP will no longer be able to refund your taxes they have withheld before you submitted W8BEN even for the same calendar year.

  10. Dianne Greenlay February 21, 2012 at 23:00 #

    Once upon a time there was an author who had just a few pointers for those of you considering going to the US embassy for the required paperwork for the ITIN (and the following points are based on my experience with going to the US Embassy in Calgary, Canada, but I’m presuming that the US Embassies have some sort of standard protocol for all of them, no matter where)
    1. You make an appointment online. Appointments are given in 15 minute time slots and you must have your appointment printed off and with you as proof.
    2. There was no parking for blocks around ( I don’t mean all the spots were taken – I mean there was no parking allowed in the vicinity) so give yourself time to walk a few blocks.
    3. There is an armed guard standing at the door to the glass walled admitting/intake office. You must leave all electronics outside this office with someone( ie. car command start, keys, iPod, and purse, although you can take your wallet with ID and cards with you etc). The guard suggested I leave mine with my “traveling partner”. but I didn’t have one. My other 2 options were to a) rent a lock box on another floor and at the other end of the building, or b) leave said items with the cashier of the Korean fast food place across the hall, (who was waving at me in a cheerful, uh, welcoming sort of way….) and who, for $5.00, would look after them until my return. I paid the friendly cashier the $5.00 …
    4. You will be required to put your shoes and wallet through the xray machine and step through a scanner yourself, just like at an airport.
    5. I had been told over the phone by one IRS agent that I would need a color copy of my passport notarized by the US embassy. On a double-check phone call, the 2nd agent said “No, your passport must be notarized as a true copy by the ISSUING office ( ie. Canadian passport office), NOT the embassy. Huh? What was I doing at the Embassy then?? To cover all bases, since I had the appointment and had taken the day off to get there, (remember, this was all just to prove I was a Canadian citizen because Canada has a treaty with the US regarding taxes on royalties) I had the US Embassy notarize color copies of my birth certificate, my photo driver’s license, my marriage certificate (yup, had to justify different surname on driver’s license vs. birth certificate), AND my health card, and then went to the Passport office for their notarization of my passport copy ( which THEY make there; don’t even try to bring a copy that you have printed off at home).

    Passport Office wanted me to come back in a week to pick up the notarized copy. I explained my distance ( 11 hour round trip), and asked, in a rather distressed voice that, by this time, was not put on whatsoever, “Really? How long does it take to sign and stamp a piece of paper?” I batted my eyelashes and let a tear slide down my cheek. I was then told that I could come back in 4 hours to pick it up. And I did.

    Oh yeah, and my new cashier friend had all of my personal belongings waiting for me, as promised, when I finished with the collecting of all of the required copies.

    I sent all copies to the IRS office along with the completed W8BEN form, and received my coveted ITIN number several weeks later.

    The End :-)

  11. Ben February 22, 2012 at 03:28 #

    I did it as David suggested. You beautiful man.
    Worked a treat, despite thier computer being on the blink. He understoon my Aussie accent as well.
    Tops.
    Ben

  12. Rosemary Jayne February 22, 2012 at 05:39 #

    This all sounds very scary and horrible, but I think thanks to David and your (Catherine’s) advice I can do this!
    Janet mentioned that they soon won’t be able to back-date your refund for the start of the tax year, so should I just apply for an EIN number as soon as I have a finished book that I can work on publishing? Or should I do it even earlier than that?

    I’m so grateful there are nice people like you in this world who will share their advice to make life easier for the rest of us.

    • catherineryanhoward February 22, 2012 at 12:11 #

      I think you should probably do it as soon as you can. You can always say you’ve already self-published… I doubt they’ll check!

    • A D Starrling April 19, 2012 at 18:01 #

      To Rosemary Jayne,

      I’m launching my ebook in July 2012 and decided to get my EIN now. The lady at the IRS did ask when I would start my business (even though I told her I was applying as an individual, not a company) and she just wanted a rough estimate, so I said July as that’s my target.

      This gives me plenty of time to send my W-8BEN form to Amazon as well!

      Also, it’s good to download and look at form SS-4 and the instructions for filling it before you call the IRS as they will be filling that form over the phone with you. Re: section 10 of the form, the example of a filled form (the one with John Smith) given on the KDP website under Tax information for non-US Resident may be wrong. I filled it in according to the example and the IRS lady told me I could only tick/check one box in section 10 (as it says on the form). She told me that ticking ‘compliance with IRS withholding regulations’ is the one to go for: I did clarify with her that I’m an author/publisher selling my own products in the US and wanted to claim the tax treaty benefits between the US and the UK.

      Hope that helps. Glad for all the helpful info on here and in other forums on the internet! Setting up as a self-published author is exciting but daunting as well. I have a list the length of my arm of ‘Things to Do’. It keeps getting longer!

  13. Dianne Greenlay February 22, 2012 at 15:21 #

    Just a thought with regards to Rosemary Jayne’s question: It sounds as though one can apply for the EIN anytime, as the author is also his/her own employer when self-publishing nowadays.

    An ITIN requires a letter from the author’s employer (ie publisher), which, for me, for my first novel, was iUniverse. ( I was too new and too uneducated in the publishing process back then to do it myself). That meant that I couldn’t apply until I had published my book with iUniverse, AND was officially their client, AND had an official letter from them stating so. What a hold up!

    Sounds like the EIN is definitely the way to go. Catherine, you are such a gold mine of information! Thanks for being here for all of us to learn from.

  14. Jonas March 12, 2012 at 14:33 #

    Great post! Helped me get my EIN number. Thanks.

    • A D Starrling April 19, 2012 at 17:42 #

      After contacting several acceptance agents for the IRS in the UK and getting quotes that it would cost me between £200-£300 + VAT to get an ITIN processed (with an average wait time of 8-11 weeks for the pleasure of actually getting my dirty mitts on it, let alone having to post my passport to them), I’m glad I read about the damn thing further and realised I just needed an EIN. Just got off the phone with the IRIS on 001 267 941 1099 (didn’t bother to phone the London number as read some people had had mixed experiences with them). Have my EIN!

      By the way, I was on hold for a good 10 minutes. I used Telediscount’s USA access number 0844 86 186 86 (calls cost 1p per minute) to call them. Have been using Telediscount to phone my relatives abroad for several years and they’re reliable and cheap (just check their website to make sure you have the latest number as they do change every few months).

  15. mlatimerridley June 8, 2012 at 15:57 #

    Fantastic, got an EIN number! Catherine and David, you were so helpful with this, thank you! I bookmarked this page ages ago and had it open when I rang the IRS (001-267-941-1099) earlier. When I was asked if I had an SS-4 form I said no but that I had the internet open, so he directed me to the IRS website where I was able to look at the form as he ask me the questions and he filled it out for me. All quite simple and the man in the IRS was lovely!

  16. Gina July 24, 2012 at 02:43 #

    Thank you, Thank you, Thank you. This one had me stumped until I found your blog. I rang from Australia and it was all done and dusted in less than 5 minutes. Just answered a few basic questions and was then given my EIN. Job well done Catherine on getting this information out to all us Non US people.

    • Cat Mora August 2, 2012 at 06:06 #

      This has been extremely informative… I’ve been researching how to set up a publishing company, and can’t really find anything useful. Gina, did you do this?

      Any other Australians do this? Or did you just somehow get by as an individual?

  17. Moira Munro March 13, 2013 at 16:06 #

    Contrary to everything I’ve read on the internet, including here, Amazon KDP tell me they will not refund the tax they’ve withheld for me:

    “Unfortunately, Amazon does not issue refunds for amounts withheld from payments issued before we had a valid W-8BEN on file. However, in March 2013, you will be issued the Form 1042S. This is an informational statement of the U.S. source income you received from Amazon during 2012 and any U.S. taxes that were withheld. Please consult a tax advisor or http://www.irs.gov about how to use this information on your tax return or claim of refund.”

    Strange and annoying… If at least the money was going to a good cause…

    • catherineryanhoward March 13, 2013 at 17:02 #

      They don’t do it anymore, Moira. Used to be that Amazon, etc. would refund all tax withheld in the calendar year to date once you sent in your W8 forms with your EIN or ITIN. Any money withheld in previous years you could only get back by filing a US tax return. Now, thanks to a rule change, I believe, they don’t keep any withholdings at all, so you have to file a tax return to get anything back.

      I just got my 1042S this morning, so they must be out around now. They’ll show how much was withheld in 2012. Then you can file a US tax return or get a company like Taxback.com to do it for you (they’re who I used; I think they charge around $75). I highly recommend them, and it’s definitely worth it if it’s a significant amount.

      It says this in the update at the top of this post.

  18. Emma December 8, 2013 at 23:52 #

    Hi everyone, firstly, thank you for the information regarding the EIN. My book is no where near being ready to publish to kindle yet but I’m aiming at March. I do have a question for anyone who may be able to answer and it is regarding the ISBN. I see that we do not need one but I have also read that it can be problematic not to have one, has anyone got any advice about this? Thanks – I realise I’m asking nearely a year after the above was written!

    • catherineryanhoward December 9, 2013 at 00:14 #

      My advice Emma would be to get one, especially as you haven’t started selling yet and so have plenty of time.

      • Emma December 9, 2013 at 00:17 #

        Thank you very much, and double thanks for the quick response! :)

        • Sera January 22, 2014 at 13:52 #

          Hello, thank you very much for the EIN information. I just want to know if I can apply for an EIN number before I inform HMRC or only after I’ve told them I’m self employed?

          • catherineryanhoward January 22, 2014 at 14:00 #

            Whenever, I would assume. There’s no link except in your own tax return.

            • Sera January 23, 2014 at 01:19 #

              Thank you for your quick reply. I’ve bookmarked this page, I really think this is the most helpful information I’ve seen about US tax witholdings and EIN numbers. I feel like I was worrying about it for nothing now, so thanks again.

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