self publish & taxes
Clipped verbatim from
who claims to have done the same from
If you are a UK citizen, paying (or required to if you earn enough) UK tax, you should not be paying US tax. There is a tax treaty between the countries agreeing this. However, the IRS will automatically deduct 30% of your earnings until you have gone through all their form-filling requirements.
Having completed most of this process myself, this is my guide to what you will need to do. Smashwords are very clued up about it and put links to all the downloadable forms you will need on their site. I’ll summarise this, and add a few bits that apply specifically to UK authors.
There are three things you need to complete in order to avoid US tax. And you need to do them in this order.
1. Obtain a letter from a withholding agent (i.e. someone who’s paying you, Amazon or Smashwords) saying that they are paying you.
2. Submit this letter along with ID and a form to the IRS.
3. When you receive your ITIN from the IRS, fill in another form and submit it to Amazon, etc.
4. If any of your earnings were withheld in previous tax years (that’s Jan-Dec in the US) you can claim back the tax for three years from the IRS.
The IRS require a signed letter, written on paper, from someone in the US who is paying you, before they will process your application for an ITIN (individual tax identification number). The statement you get with a cheque from Amazon, which clearly states they are paying you and how much, is not enough.
Smashwords are very clued up and helpful about this. Amazon, unfortunately, are not. As soon as you earn $10 from Smashwords, they will provide the necessary letter – click a button to request. I would suggest that if you are earning and being taxed by the IRS, the sooner you get the tax process started, the better. I would advise any new author, even if you aren’t selling much (or anything) through Smashwords, it might be worth buying enough copies of your own book through them (you’ll get most of it back as royalty anyway) in order to request that letter now.
When you have a letter stating you are being paid by a US company, you can apply for an ITIN. You will need to fill in form W-7. This, and the copious instructions for filling it in, can be downloaded from the IRS website. Smashwords provides the links, but do a Google check just to make sure you have the most up-to-date form. You can fill it in on your computer, then print it off and sign it. Reason for submitting form should be a, and h, and alongside h you should write ‘exception 1d royalties’. The treaty article number is 12 [for the UK, I assume – Nick].
You now need ID, preferably a passport. It’s possible that a driving license would be accepted, but check first. The US Embassy in London are very helpful and will answer questions by email. They say they also offer phone support, but I’ve not known them answer!
When you have your letter from Smashwords, completed W-7 and passport(s), you have three options.
1. Get your passport copied and signed by a notary (cost approx £50 – £100) and send with form and letter to the IRS in the US.
2. Go in person to the US embassy in London (check their website for opening times).
3. Send your documents, including passport, to the US embassy in London (cost approx £5 for special delivery).
I went for option 3 and am glad I did for several reasons. Many people get something wrong first time and have to redo it – not good if you’ve sent everything to the US. The embassy will check everything for you and return your passport by special delivery within a couple of days. They then forward your application to the US and will follow it up for you if it takes too long, etc.
Eventually you will receive a letter from the IRS with your ITIN. You now need to download form W-8BEN and instructions from the IRS. As usual, Smashwords have the links for this. They also suggest that you enter the user name and/or email you use with them in the ‘reference number’ section of the form. You will need to fill in the form, including your ITIN, and print a copy for each company paying you, e.g. Smashwords, Amazon. Obviously, the reference details for each one may be different. You then need to sign and post a physical copy to each company.
Once the forms have been received and processed, any tax withheld by each company for this tax year should be automatically reimbursed by them. Any tax withheld for previous tax years will have already been sent to IRS and you will need to claim it back from them yourself.