for helping me update this information. If you need professional assistance, she can be contacted at her website, www.BeyondFrontiersTax.com, and would be an excellent resource.
Update: Since I originally wrote this page, some of the information has changed, and the process is actually more complex than it was originally. I would like to thank
Marcela Martinez Millan, the author of
Beyond Frontiers: A Tax Guide for Non-U.S. Citizens
You probably found this page because you are doing business with a company in the United States, and that company is required to withhold 30% of your earnings for U.S. taxes. As you've probably learned, you can stop this withholding by obtaining a U.S. Individual Taxpayer Identification Number (ITIN). In some cases, you may need to obtain an ITIN in connection with credit card transactions. I am an attorney in Minneapolis, Minnesota, USA, and I have written this page to provide information on obtaining your ITIN. With the information on this page, you should be able to complete the process yourself.
In many cases, U.S. companies are required to withhold 30% when making payments to persons outside the United States. This issue commonly arises with authors outside of the United States who self-publish books through companies such as Kindle Direct Publishing, Smashwords, or CreateSpace. But the issue can arise with any U.S. company that owes you money. Unless you have the proper taxpayer number, the company is required to keep some of your money and send it to the U.S. Internal Revenue Service (IRS).
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I understand your frustration. You don't live in the United States, and perhaps you've never even set foot in the United States. But the U.S. Government wants to take some of your money. No, it's not fair. No, it's not just. But unfortunately, that's what the law currently is. The American company with whom you are doing business is required by law to hand your money over to the U.S. Government.
The good news is that in most cases, you can avoid this withholding. You're going to have to jump through some bureaucratic hoops in order to do so. The purpose of this page is to explain how to do so, and to provide assistance if necessary.
The instructions on this page assume that you are receiving money from a U.S. company such as Amazon, Smashwords, or CreateSpace and want to avoid withholding. Most of the same instructions will apply if you need the ITIN for some other reason.
If you have had money withheld in a previous year, the first bit of good news is that you can get this money back. You'll need to file IRS Form 1040NR. For further information about that process, you can visit the IRS website, or consult other sources such as the book referenced toward the bottom of this page.
The second bit of good news is that, in most cases, you can avoid the withholding entirely. Even though the U.S. Government makes the process difficult, it does have tax treaties with almost every country in the world. Most of these treaties say that if you pay taxes in your own country, you are not required to pay U.S. taxes on certain types of income, even though the income might have originated in the United States. These treaties are summarized in IRS Publication 515. As you can see, most of this publication is written in legaleese, but you can look up the correct tax rate, and it is usually much less than 30%. The exact rates are shown in a set of tables at the end of this publication.
For example, if you are a citizen of Mexico and earned interest income or dividends from a U.S. company, you would look at the table on page 41. This shows that under the treaty, the correct rate is 15% for interest, and either 10% or 5% for dividends. If you are a citizen of Australia and earned income from royalties on a book, the correct rate is 5%. In the case of royalties from a book, you will see that in many cases, the correct rate is 0%. For example, the rate is 0% if you are a citizen of any of the following countries: Austria, Belgium, Canada, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Japan, Netherlands, Norway, Pakistan, Russia, South Africa, Sweden, Switzerland, the United Kingdom, and many other countries. Even if there is some tax under your country's treaty, it is almost always less than 30%.
If a company is withholding 30%, they will lower the withholding rate to the one shown in this publication. In most cases, that is zero; so they will stop withholding entirely. But in order for them to legally do that, you need to provide them with certain information. The main item they will require is your Individual Taxpayer Identification Number (ITIN) or Employer Identification Number (EIN). If you are eligible for an EIN, then the EIN is much easier to obtain. However, not all persons are eligible for an EIN. If you're not sure whether you are eligible, then it's probably best to apply for the EIN first. If your request is not allowed, then you will need to apply for an ITIN.
An EIN is an Employer Identification Number, and it is primarily intended for use by people who have employees in the U.S. An employer is required to withhold taxes from employees, and the EIN is used when submitting this withholding tax. Information about EIN's is available in this IRS publication or on this IRS page.
While the criteria are not abundantly clear, many authors have reported that they obtained EIN's with no difficulty. Others have reported that they were unable to obtain an EIN. I suspect it depends mostly on how you ask. Again, the EIN is intended primarily for employers to report withholding taxes. If there is a possibility that you will employ U.S. workers in the future, then this is an appropriate reason for getting an EIN, and you should probably state this reason when applying. If you state that you want the number only for use on a W8-BEN form, then you'll probably be told that you should instead apply for an ITIN.
You will need to apply by phone. The phone number is +1-267-941-1099. (Other international offices are listed on this page.) If you are an individual, you will say that you are a applying as a "sole proprietor", which is defined as "a business that has only one owner and is not incorporated or registered with the state as a limited liability company (LLC). A sole proprietor can be a self-employed individual or an independent contractor. Sole proprietors (self-employed individuals) report all business income and expenses on their individual tax returns (Form 1040, U.S. Individual Income Tax Return, Schedule C, E, or F). A sole proprietor may or may not have employees."
You will need to answer why you are applying. In most cases, you will probably select the option, "started a new business."
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There is an online form for applying for an EIN. However, the online form requires you to enter your current Social Security Number or ITIN, which you do not have. Therefore, it's not possible to use the online form. You will need to call the IRS and ask them to issue the EIN.
Again, the EIN is primarily intended for employers, and the IRS representative might not issue you a number. But many authors have reported that they successfully obtained an EIN by calling the IRS and asking. Since it will save a lot of trouble, it's probably worth making the call. But if the IRS representative says no, then you will need to apply for an ITIN.
Please note that like at many large bureaucracies, you might need to wait on the phone a long time. If you're calling internationally, it might be a very expensive phone call. If your phone uses batteries, you should probably make sure it's both fully charged and plugged in. And unless you have unlimited international long distance, it's probably a good idea to purchase a prepaid phone card with enough minutes for a few hours waiting on hold. One source of phone cards that you can purchase online can be found at this link. That site contains a search engine where you can find a card with the lowest rates for a long call from your country to the U.S. (Note: That link is an affiliate link, and I will receive a small commission if you purchase from it.)
I've been told that the best time to call for the shortest waiting time is when they open in the morning, at 6:00 AM Eastern Time (this is the same as New York time).
You can also apply for the EIN by mail or fax. To do so, fill out and sign
Form SS-4 and mail or fax it to:
Internal Revenue Service Center
Attn: EIN International Operation
Cincinnati, OH 45999
USA
FAX: 1-859-669-5987
The instructions for form SS-4 are available at this link and this link.
There will be some expense in getting your ITIN. It will probably cost you about US$50 - US$100, mostly because you will need to obtain certified copies of your identification documents. There will also be postage costs in sending the documents to the U.S. And during this process, you will probably need to visit a U.S. Consulate, which will probably take most of a day, and might require travel expenses. If you have only a small amount of U.S. income, then it might not be worth the trouble: You can simply wait until January 1 and then request a refund from the U.S. Government. Or if the amount is very small, you can simply ignore it, and resign yourself to the fact that the U.S. Government will be keeping some of your money.
But if you are earning money on a regular basis, then it is worth the trouble and expense for you to obtain an ITIN, so that you can keep your money in your pocket where it belongs. For example, if you live in a country with no withholding (such as the U.K.), this will immediately increase your monthly income by 30%. And even if you live in a country with some required withholding (such as Australia, at 5%), this is certainly a vast improvement.
Update: Since I wrote this, the procedures of the IRS have changed for the worse. An accountant sent me the following comments:
In this section you righly mention that the process is cumbersome and that if the money is not too much it might not be worth going through the hassle. However if they avoid the process of getting an ITIN to stop withholding in hopes of getting it back next year when filing the 1040-NR, they will then need an ITIN to file a 1040-NR. So they will only be delaying the inevitable and even making it harder to get the ITIN (see the next point).
The IRS changed some of the rules for the documentation they will accept for ITINs. It is more complicated than ever so I will try to simplify it:
The ITIN application requires a tax return to be attached to it where the applicant appears (either a taxpayer, spouse, or dependent). There are a few exceptions to the requirement of attaching a tax return to the ITIN application. One of the exceptions is to be paid royalties. So you can get an ITIN without filing a tax return if you receive royalties from KDP, Smashwords, Apple, CreateSpace, etc
Now here are the ugly details: Starting in June 2012, when applying for an ITIN the IRS will only accept original documents, or copies certified "by the issuing agency". No notarized copies/certified copies and no apostilles.
However when applying using one of the exceptions (when are not filing a tax return along with the ITIN application) as most authors will do, the old rules apply. You can send notarized/certified copies and apostilles. So far so good.
In theory, it should be easier to get the ITIN using the exception method than the tax return method because the documentation requirements are less stringent. The problem is that IRS agents mix the rules, so they might reject an application if it has a notarized copy because they learned now that those documents are not acceptable even though the old rules are supposed to apply. It has become a matter of luck, for example from July to December of 2012, 64% of the applications were rejected. I have heard of cases where the IRS has even rejected original passports.
Large accounting firms are usually Certifying Acceptance Agents (different from regular Acceptance Agents). However small firms and even individuals can be AAs or CAAs. A big difference is that using a CAA allows the applicant to keep their documents, but using an AA requires the applicant to send their documents to Austin anyway (originals or copies certified by the issuing agency), so it is infinitely better to use CAAs rather than AAs.
KDP recently implemented an electronic tax interview. Every author is required to go through the interview and if they agree to sign electronically, they will submit the tax form electronically (be it a W-8BEN, a W-8ECI, or a W-9). So most people will not need to send a paper form anymore. The downside is that Amazon is matching the information submitted to them electronically against IRS records and this seems to be taking a long time. Weeks before their account is "certified" (for lack of a better term). Amazon says up to 6 weeks... by what the authors are saying, it is seems to be true. You can see this at:
https://kdp.amazon.com/self-publishing/help?topicId=A1XK5UN6BLNHGV.
Amazon also informed authors that they will not refund prior withholdings, so if the author did not get the paperwork done on time, they will need to file a tax return to get the money back. This information was in their tax page before they changed it to accomodate the tax interview information so I can't find it anymore, but it was there. But the form that is electronically generated does not contain the affidavit.
To obtain your ITIN, you will need to file IRS Form W-7 and mail it to Austin, Texas. You can also download the instructions for this form at the IRS website. But as you can see, before you fill out this form, you will need to obtain some documents.
First, you will need to submit documents establishing your identity. You are allowed to send the original documents. So if you are comfortable mailing your original passport to Austin, Texas, you may do so. However, by doing so, you obviously run the risk of its getting lost in the mail, or getting lost in the IRS office. Because of this risk, most people don't send original documents. Instead, it is best to send copies.
Unfortunately, you can't send just any copy. You need to have the documents certified. There are three places you can have your documents certified: (1) A notary in the United States; (2)A notary in your country (or the government office that issued the document); or (3)A U.S. Consulate or Embassy.
If you plan to be in the United States for any reason, the easiest and least expensive way to certify your documents is to use a U.S. notary. This service will generally cost less than ten dollars. The notary will examine the original document(s) and compare them with the copy. If the copy is identical, then the notary will certify that he or she has examined them and that they are identical. Again, this is the cheapest option, if you happen to be travelling to the United States for any reason.
The other option is to have a notary in your country perform this same service. Unfortunately, this is often the most expensive option. This is because, in addition to having the document notarized, you will also need to obtain an "apostille" from another government office in your country. This process varies from country to country, and the expenses will also vary. If you are a long distance from a U.S. Consulate, this might be your only option. But because the requirements for obtaining an apostille vary, you will need to determine what steps need to be taken.
The last option is used by most people applying for an ITIN. This option is taking your documents to a U.S. Consulate and having them certified there. Each consulate will have a slightly different procedure. But typically, you will need to make an appointment, bring the documents to the appointment, and pay a fee for each document. The fees might vary, but are typically about US$50. Different consulates have different policies regarding payment. For example, some will accept credit cards, some will accept local currency, and some will accept U.S. currency. You should carefully check these policies.
Most consulates will have this information on their website. Generally, if you do a Google search for "U.S. Consulate [name of city] Notary Services" you will find this information. Here is the information for a few consulates and embassies:
Before you schedule an appointment to have your documents certified, it's important to make sure that you have the correct documents. If you have a current passport, this is the best document to use, because the passport can be used by itself. Since most consulates charge per document, this will result in a cost savings.
If you do not have a passport, then you will need to provide two documents. One of these documents must establish your "foreign status" and one must establish your identity. At least one of the documents must contain your photograph. You must have at least two documents from the list below:
In addition to these documents, a driver's license (either U.S. or foreign), a U.S. military ID, or a U.S. state ID card are acceptable as one of the two documents. However, you will still need one document from the list above, because only those documents establish your "foreign status".
Once you have those documents gathered, take them to the U.S. Consulate (or, if you are in the U.S., to a notary) and have them certified. Then, set the certified copies aside, since you will need them when you send in your form W-7.
The IRS will not issue an ITIN to just anyone. You need to establish that you have a need for the number. As you look through the instructions, you will see that most of the instructions are geared toward people who need to file some other IRS form. Unless you are applying for a refund of past withholding, this will not apply to you. Your purpose in applying for the ITIN is to avoid withholding in the first place. Once you receive the ITIN, you will probably never need to file another IRS form again in your life, because you will be able to stop the withholding. I'll provide step-by-step instructions for filling out the form below. But as you can see, the first piece of information you will need to supply is your reason for applying. If you are applying to avoid withholding, you will check boxes "a" and "h" at the top of the form. In the space following box "h" you will need to enter" "Exception 1(d), royalties". (See pages 4 and 6 of the instructions.) And you will need to supply a document showing that you are receiving royalties. Normally, this will be a letter from a U.S. company stating that they do, indeed, need to pay you royalties.
If you are expecting royalties from Amazon's Kindle Direct Publishing (KDP), then it seems logical that you would get such a letter from them. Unfortunately, numerous authors have run into trouble using the letter supplied by Amazon. This is because Amazon does not appear to be willing to write individual letters for individual authors. Instead, Amazon sends you to a link on their site, where they have a PDF form letter. They ask you to fill in the blanks and then print the letter yourself.
There have apparently been some cases where the IRS accepts this "do it yourself" form letter. However, many authors on the KDP forums have reported that the IRS has rejected this letter.
Most authors have reported greater success by using the letter provided by Smashwords. Smashwords is a small competitor of Amazon, and like KDP, provides a platform for self-publishing. But unlike Amazon, Smashwords will provide a personalized letter, and in most cases, the IRS requires the personalized letter. Smashwords' policy is to provide this letter to authors whose earnings are at least ten dollars. You can find the detailed instructions for obtaining the letter on the Smashwords website. Once you have ten dollars earned, you click on the link provided by Smashwords, and they will send you the personalized letter you need.
Even if you make most of your sales on Amazon, I strongly recommend opening a Smashwords account, and encouraging a few of your friends to buy your book through Smashwords. As soon as you have ten dollars in earnings, Smashwords will promptly supply you with the letter you need, and you won't run the risk of having the Amazon form letter rejected by the IRS.
CreateSpace (an Amazon subsidiary) can also provide the letter you need. According to some authors, CreateSpace initially directs its authors to a form letter similar to Amazon's. However, upon request, they will apparently issue a personalized letter. If you are published through CreateSpace and not Smashwords, it might be worthwhile to request the letter from CreateSpace.
Finally, if you are receiving income from some other U.S. Company, the letter should come from that company. If the comapny is not familiar with what you need, you can direct them to the Amazon form letter as a model. The content of that letter is exactly what you need. However, the letter needs to be personalized with your name and information, and must be on the U.S. company's letterhead.
When you have completed the form, you should send it to the IRS in Austin, Texas. Don't forget to include: (1) the separate sheet of paper with the information about your second identity document; (2) the certified copies of your identity documents, and (3) the letter from the U.S. Company.
If you are sending the letter via the postal service, you should mail it to the following address:
Internal Revenue Service
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342
If you are sending it via a private courier company (FedEx, DHL, UPS, etc.), then you should send it to the following
address:
Internal Revenue Service
ITIN Operation
Mail Stop 6090-AUSC
3651 S. Interregional, Hwy 35
Austin, TX 78741-0000
In about eight weeks, the IRS will send you a letter with your ITIN.
Now that you have your ITIN, you need to officially inform any U.S. companies that they should stop withholding 30%. As soon as you inform them, they will stop withholding, or at least reduce it to the lower rate specified in your country's tax treaty. You do this by downloading another government form, Form W-8BEN. The form is also available on the Amazon website. (It's best to use the Amazon version, since this also contains an affidavit which will allow the paying company to refund some previously withheld amounts.) Don't be dismayed at having to fill out another government form. This one will not be seen by the U.S. Government. Instead, it merely goes to the company in question, and serves as official notification of your new status.
This form is relatively self-explanatory. It is also less stressful, since you don't have to worry about it being rejected over some small error. The company you're sending it to doesn't want to send your money to the U.S. Government any more than you do. They are required by law to do so until they receive the W8-BEN.
Here are the step-by-step instructions for filling out this form:
Finally, you will mail this form to the company. (Prepare one original document for each company). You may wish to include a cover letter explaining which account number it goes with, etc. As of the date this page was written, here are the addresses for Amazon, CreateSpace, and Smashwords:
CreateSpace
8329 West Sunset Road, Suite 200
Las Vegas, NV, 89113
USA
Smashwords
Tax Compliance Dept.
15951 Los Gatos Blvd., Ste 16
Los Gatoes, CA 95032
USA
Amazon KDP
Attn Vendor Maintenance
PO Box 80683
Seattle, WA 98108-0683
USA
As soon as these companies receive the form, they should stop withholding. And if the affidavit at the bottom of the form has been completed, they should refund the withholding from this calendar year.
If you need further information about the U.S. tax system, such as how to file a non-resident tax return, one resource which appears to be excellent is the book Beyond Frontiers: A Tax Guide for Non-U.S. Citizens
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Copyright 2010-2014, Richard P. Clem.
Attorney Richard P. Clem is responsible for the content of this page.
Richard P. Clem, Attorney
PO Box 14957
Minneapolis, MN 55414
USA
Phone: +1-612-378-7751
e-mail: clem.law@usa.net
Minnesota Attorney Registration Number 0192648
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