Wednesday, September 12, 2012

Decreased tax withholding rate on royalties for Non-US


Hello!

I received a letter in my mailbox today from IRS regarding my EIN application. I actually got my EIN the day I called up the IRS Philadelphia office (which was a month ago,) but I still got excited when I read the letter.

Anyway, as you may have guessed from the title of this post, I will be sharing how I got my EIN number, and why you should get one if you’re earning some royalties from the US. I’m not good with writing tutorials, so please bear with me. (I’m more of a creative writer, in fact, my YA novel, PLEASE STAY is now available in digital formats at AMAZON and SMASHWORDS!)

If you have questions, please feel free to leave a comment below and I’ll get back to you soon.

So to start…

I’ve been receiving some income from the US since 2008, and those income came from different streams like POD (print on demand business like Zazzle) and recently with self-publishing, (Smashwords and AMAZON KDP)

Since I’m not a US citizen, I am subjected to a 30% withholding rate. You’ve probably heard of this since you’re reading this post. So moving on, I’ve learned that I needed to submit a completed W-8BEN form indicating that I’m not a US citizen (I’m from the Philippines) and that an existing tax treaty between the US and my country states that I’m eligible to apply for a tax deduction. (in my case, my withholding rate decreased down from 30% to 15%, it depends on your country.)

Getting a W-8BEN form is easy, and you can download it from the IRS website here. But the tricky part is obtaining the ITIN that goes with your W-8BEN application. It’s a long process, and there are a bunch of requirements needed. Luckily, I learned that there’s a much easier way to do it. And this is how…

GET A US EIN INSTEAD

No, it’s different from ITIN since ITIN is a tax identification number, while an EIN is an employer identification number, but it will still get the job done.

SO WHAT DO I NEED TO OBTAIN AN EIN NUMBER?

1.       Download  an SS4 form from IRS here and fill it up.

SS4 form sample
(you don't have to print this)


2.       When you’re done, call the IRS office in Philadelphia. YES!! LONG DISTANCE!! It’s worth it, I SWEAR!

Internal Revenue Service
Attn:  EIN International Operation
Philadelphia, PA  19255

Tel # +1 267 941 1099 (I used my mobile phone and it took me about 15 min.)
Phone service available from 6:00 am to 11:00 pm (EST) M-F

You will then be asked some questions which are found in the SS4 form you just accomplished. And since this is a telephone exchange, you’ll have to spell out your name and address letter by letter.

You will then be asked for a reason why you’re applying for an EIN, in which case you’ll answer that it’s for online royalties. As for my own experience, I was asked for the kind of royalties I’m receiving and I said it was for e-books. (Though it can also apply for others such as selling shirts, apps etc.)

She then put me on hold for about a minute and she came back with my EIN number! Yes, that’s how fast it was!

After receiving your EIN, you will then proceed with filling up your W-8BEN Form.

W-8BEN form sample
(you have to print it)

Don’t forget to write “SELF” in the blank that says Capacity in which acting below beside the SIGN HERE portion and you’re done.

I haven’t yet submitted my form to Zazzle, but I already did with my Smashwords and Amazon KDP, and they already changed my withholding from 30% to 15%.

Again, the rate of your withholding depends on the tax treaty between your country and the US.

HOW DO I KNOW MY WITHHOLDING RATE?

So that’s it! I primarily wrote this post for people looking for a solution for the 30% withholding tax rate, and since there are a few of them, I thought that sharing my own experience would help a lot of people.

Again, if you have questions, please don’t hesitate to ask. :D

Thank you and good day!

-DEN

P.S Don’t forget to checkout my novel PLEASE STAY.

P.P.S I’m on twitter too! @denisewy

6 comments:

  1. Hi Denise,

    Kakukuha ko lng ng EIN. May mga nonfiction books ako sa amazon pero mostly outsourced. May childrens book akong pineprepare, hopefully marelease next month. Musta sales? Kelan free promo? :) lol. Sayang taas pa rin ng withholding, 15%.

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  2. Hi thank you for posting this! please I have 2 questions:

    1) before you got your EIN nubmer and amazon (etc) held 30% of your earning royalties--how were you told about this? Did it appear in your statments from them?

    2)After you got your EIN and gave them the W-8BEN --did they (amazon etc)verify to you (by email etc) that "okay Denise your W-8BEN has been deemed acceptable we wont hold the extra amount from you"

    For #2 Im worried before I send it in --if its rejected or anything and they dont tell me.

    I wish you the best in your writing future, from a fellow writer in Canada!

    Best,
    George

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    Replies
    1. Hey George,

      Thanks for dropping by. to answer your questions:

      1. The 30% withholding applies for all non-us publishers, so it's automatic.

      2. Yes, Amazon sent me an email notifying me that they accepted by W-8BEN and that they've also changed my withholding rate from 30% to 15% :)

      Delete
  3. Thanks Denise! I envy you being there in that warm country! Its getting cold here (again). But that's Canada for you :D

    Best, George

    ReplyDelete
    Replies
    1. Haha! I would love to visit Canada and try celebrating the Holidays in a cool weather for a change. :D

      Delete
  4. Thanks a lot for this blog post, just wanted you to know I used it to get my EIN here in the Philippines as well. And after 3-4 weeks I finally got this message back from Amazon:

    >Thank you for submitting your W-8BEN. Your withholding rate is set at 15%
    >and we are retaining the original form on our files. Please remember to submit
    >a new form if your information changes. If you have any questions, please let
    >us know.

    It still sucks that I have to pay the 15% which I did not know when I started publishing, but I was lucky and hit your blog here before my first payment arrived, so I will hopefully get my first payment with 15% instead of the 30% withholding.

    I also did this from the Philippines, just calling the center in Philadelphia. It took around 15 minutes total and I got my EIN on the phone as well. I had the form filled out on my screen for easy reference during the call.

    They told me they would send me a letter with the EIN and additional info as well which I haven't got yet.

    Now I can get back to working on what really matters, get good quality books published and make some money :-)

    Thanks :)
    Peter

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