Canadian Authors- How To Avoid Amazon/Smashwords/CreateSpace from Withholding Taxes
So, you’re sitting in Cobourg, Ontario, or Biggar, Saskatchewan, or perhaps even Yarrow, British Columbia. You’ve published your e-book masterpiece through Amazon or Smashwords, or maybe you’ve released a print book through Amazon’s print on demand company – CreateSpace. You’ve sold some books and you’re waiting for your royalty cheques to arrive. Your first cheque is 30% light. Your chosen distributor (Amazon, Smashwords, or CreateSpace), has withheld 30% for US taxes. Without following the correct process this will happen.
As a self-published author we sometimes forget that we are indeed the publisher, and our chosen platform is the distributor. Whether we release our e-books through Amazon or Smashwords, or our print books through CreateSpace, we are responsible for submitting our tax information to the distributor. Fortunately, Canada has a tax treaty with the United States, so as a Canadian author we’re eligible for a 0% withholding tax on royalties. Bear in mind we still have to pay tax on our earnings in Canada, but there’s no reason to pay taxes twice. This means that in order to avoid that dreaded 30% shortfall we need to obtain an Individual Tax Identification Number (ITIN). I’m going to show you how to get one and how to submit it.
- Apply for an ITIN
I live quite close to the US border so I was able to visit an IRS office in person. If this isn’t an option you can mail in your information.
Here’s what you’re going to need:
a) A completed W-7 form. Here’s one right here.
b) A certified copy of your passport from the Canadian Passport Office (you need a certified copy even if you’re visiting in person).
c) A letter stating that you’re an author who will be receiving royalty cheques from a US distributor. Here’s a link to Amazon’s letter. If you’d like one from Smashwords you can request it via their customer support link.
2. Submit your ITIN in person at an IRS office or mail to:
Internal Revenue Service
P.O. Box 149342
Austin, TX 78714-9342
Once you receive your ITIN keep it in a safe place. Do not mail it to your distributor. You only have to submit the information.
For your e-books through KDP (Amazon) you can submit electronically or by mail.
Here are the directions to submit online, taken directly from Amazon’s site:
- Sign into your KDP Account at http://kdp.amazon.com
- Click on the link found in the top right of the page called “(Your Name)’s Account”
- Scroll down to the “Tax Information” section
- Click the button to “Complete Tax Information”.
If you’d prefer to send by mail to Amazon you’ll need to fill in a W-8BEN. Here’s where you can find one. And, here are the directions on how to submit the form by mail.
- Complete the form using the IRS W-8BEN Instructions.
- Sign the form in Part IV – an original signature is required.
- Write your Kindle Direct Publishing Account ID in the top margin of the form to match it to your account.
- Send the signed original version to:
Attn: A/P Tax
PO Box 80683
Seattle, WA 98108-0683
To submit electronically to Smashwords:
Once you receive your US Tax Identification Number (ITIN or EIN), go into your Payment Settings page and enter your new number (ITIN), into your account.
Or, you can mail a completed W-8BEN to Smashwords here:
Attn: Tax Compliance Dept.
15951 Los Gatos Blvd., Suite 16
Los Gatos, CA 95032 USA
CreateSpace will only accept a hard copy mailed to them. So again, you’ll need to complete a W-8BEN and mail it to:
c/o AP Tax
PO Box 80683
I know, it sounds complicated, but once it’s done – it’s done. Please bear in mind that although I’ve gone through this process, I am not an accountant or a lawyer, so please consult with a tax professional if you have any questions or if you have other income or revenue coming to you from the US. The above information was current and tested in August 2014, but may not apply to your individual tax situation. Regulations and tax laws change from time to time so make sure you read the instructions on the above links. And, if you find any inaccuracies in this article please let me know, as I will endeavour to keep this information as current as possible.
UPDATE JAN. 2015
As some of you may have noticed Amazon has now made the process of obtaining ITIN simpler. When you first upload your book you are diverted to an online application process. I walked through the system with an author recently and their ITIN application is now pending. This should make things easier.
It also looks as though EIN is no longer being accepted. EIN is simpler to obtain but from my research it appears at though Amazon (and the IRS) want your ITIN instead of EIN. We’ve been trying to get this information out for the past couple of years and those of you who have done the work and obtained your ITIN should have no problems.
Oh, and by the way, I understand that you can reclaim that 30%, but the process sounds pretty complicated to me. It seems much easier to just get the ITIN
If you find this information useful I’d really appreciate if you’d pass it along to your colleagues. Good luck with your books!