Thursday, 15 September 2011

Self-publishers beware - you could be paying too much tax

There are so many of us now who are self-publishing with Smashwords and Amazon, but if you are not resident in the US then you could have an additional 30 per cent of your income taken off you in tax. Smashwords and Amazon will deduct this automatically on behalf of the Internal Revenue Service (IRS) before they send you your earnings, unless you provide them with the proper paperwork.

I've just completed the process - or at least, I have my final forms sitting on the bookcase by the door ready to be posted off tomorrow. If you're self-publishing and you're wondering how to avoid paying additional tax this, in a nutshell, this is what you have to do:

1) Get a letter from someone who's paying you.

2) Send it to the IRS with a completed form W-7, plus supporting identification. Provided everything is in order, the IRS will issue you with an Individual Taxpayer Identification Number (ITIN).

3) Send a completed form W-8BEN, on which you state your ITIN, to everyone who is paying you.

Writer Ali Cooper has written a very comprehensive guest blog post about the process over at Nick's Writing Blog. Rather than repeat the same information here, I'd recommend having a read of that as it takes you through everything step by step.

Amazon aren't as user-friendly as Smashwords overall, but they do provide examples of completed W-8BEN forms once you reach that stage. This page also has the address you need to send your form to for Amazon KDP. Incidentally, if you publish through KDP and CreateSpace, you will need to send a completed W-8BEN to both. The CreateSpace address is:

CreateSpace Accounts Payable
8329 West Sunset Road
Suite 200 

Las Vegas,
NV 89113

It may seem like a hassle to jump through all the necessary hoops, but if you do this as an integral part of your business start up process, it gets it over and done with. And - should your book(s) suddenly take off like a rocket - you won't be playing catch up and then chasing the IRS for a refund!

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