How Canadian writers can avoid US taxes

This is a serious matter and I’ll try to keep the jokes to a minimum. So a priest and a rabbi walk into a gay bar… Okay, we’re already on the wrong track.

This new e-book revolution is making a writer out of everyone and their pet Doberman. And that’s normal, many of us have written something – a novel, some poetry, etc. – and now there’s an opportunity to make money out of it. But where there’s money there’s the taxman. Since these self-publishing platforms are located in the United States, you can bet your sweet hairy butt the IRS will look into stealing all that money from you.

If you’re from Canada, you can tell the Internal Revenue Service to suck it!

Normally, if you live outside of the US the IRS will have the vendors withhold 30% of your earnings. However, because of tax treaties certain countries are exempt from this withholding. By following these steps you’ll legally get Big Brother from keeping your hard-earned money.

NOTE 1: I’m not an attorney or accountant. I’m going to share with you what worked for me.

NOTE 2: I’m assuming you’re publishing through Smashwords as well as the traditional vendors such as Amazon. If you’re not, my method won’t work.

The Procedure

There are two major steps to this, the first one being the most time-consuming.

  • 1- Get an Individual Tax Identification Number (ITIN) through the form W-7;
  • 2- Complete the form W8-BEN.

1. Getting an ITIN

The individual tax identification number is how the IRS deals with you. We’re all numbers in a computer and since you’re from outside the USA you don’t have a Social Security number. So the first step is to make yourself known by becoming a fiscal entity, the ITIN. This is how you go about getting one:

Get the Smashwords letter

Accrue $10 in sales at Smashwords and you’ll be eligible to receive a hand-signed letter written on Smashwords letterhead stating your reason for requesting an ITIN. Once you have the required sales, click on your Payee Profile and you’ll see the link to request your letter. Count on at least a month before you receive the letter.

Get a certified copy of your passport

Meanwhile, go to your Passport Canada office, bringing your valid passport of course, and tell them you need a certified copy. This is basically a notarized photocopy. They don’t advertise it but they do it for free once you fill out a little form they will hand to you. It takes about three days for them to do this. I don’t know if they can mail it to you, I picked mine up a few days later since I live nearby.

Fill out the Form W-7

Download the form from the IRS and fill it out. Here are the instructions. Below is how I went about it.

Send the signed form, including your original Smashwords letter and certified copy of your passport, to

Internal Revenue Service
Austin Service Center
ITIN Operation
P.O. Box 149342
Austin, TX   78714-9342

Again, it may take over a month for you to receive your shiny new ITIN.

2. Send the W8-BEN

The W8-BEN is basically a form which tells the vendors that you meet the treaty criteria so that they can stop withholding 30% of your income.

Download the form from the IRS and fill it out. Here are the instructions. Below is how I went about it.

Now all you have to do is sign the form and snail-mail it to each vendor where you sell your books in the US.

Amazon:

Amazon Digital Services
Attn: Vendor Maintenance
PO Box 80683
Seattle, WA 98108-0683

Smashwords:

Smashwords, Inc.
Attn: Tax Compliance Dept.
15951 Los Gatos Blvd., Ste 16
Los Gatos, CA   95032

That’s it! Once the vendors receive the W8-BEN they won’t withhold money anymore. It’s even possible Amazon will contact you with a different version of the W8-BEN (with affidavit, can’t find it online) so they can reimburse you what they already withheld. It happened to me.

12 Responses

  1. Hey EVERYONE. Take a deep breath. You don’t need an ITIN AT ALL.
    I live in Canada and my friend lives in Britain. AND, if you just call your US embassy on the phone and tell them that you are the
    ‘SOUL PROPRIETOR’ as an author who sells books, then they have to give you a number over the phone. It’s an EIN number and it’s for the IRS to track your taxes. Amazon accepts this number. I know because they took the hold off of my cash. Don’t believe all that BS about having to have a company or any employees to get an EIN. I timed my phone call and I had the number written down on a post-it note within 11 minutes. That’s it, that’s all. Call your local US consulate or the nearest one to you and say:
    “I am the soul proprietor and I sell a product in your country (US) and I want to pay you taxes. I need an EIN number please.” After that, they will walk you through some simple questions and just tell them that you son’t have any employees, but you may hire some at a LATER DATE. Anyway, the lady I spoke to in Seattle was awesome.
    Technically, it is a business because you are creating and selling a product. Amazon is just your distributor. If you happen to get someone on the phone that tells you otherwise to anything I’ve said here, they don’t know what they are talking about, so just call back and get someone else. In fact save yourself the headache and just call the US embassy in Seattle Washington. Have a great day and stop wasting your valuable time and money. 11 minutes folks!! Amazon cleary states that you need EITHER an ITIN (if you are a US citizen) OR, OR an EIN (for everyone else in the world) It works, stop being so crazy!

    • Well, an EIN is if you’re a business and an ITIN if you are an individual. I did this as an individual — the mythical ITIN — and not only did it cost me nothing but it was pretty hassle-free if you follow the above method.

      Glad it worked out for you though, Ramona…

  2. Hi Steve, great write up and much needed. I am still getting started in the process now that the book is ready ! I just had one question i looked at another site Canadian Writer as well – http://stephensgerardmalone.wordpress.com/2012/02/22/canadian-writers-do-you-need-an-irs-itin-for-ebooks/ – he mentions that he got his passport notorized at the US Consulate for a $ 55 fee and you said you got it done free at the Canadian Passport office. I like your steps am i missing something here ?
    thanks and cheers

    • Hey Sunny,

      I think going to the US consulate works if you’re living abroad or if you don’t have a Passport Canada office near you. The certified copy works because being certified by the issuing party.

      All I can tell you is that the way I did it, I went to the Passport Canada office (which is two minutes from my house) and they gave me a certified copy of my passport for free. Took two minutes to do the paperwork, three days to get the paperwork ready (I went to pick it up), and the IRS accepted this with no problem.

    • In Canada, anything you write is instantly copyrighted. This said, you can register the copyright of your book at the Canadian Intellectual Property Office. It costs something like $50.

      I didn’t get specific ISBNs beyond the free ones I get through Smashwords for premium distribution. ISBNs are obsolete in the age of e-books. If you do print-on-demand, the company you use will probably be able to offer you ISBNs. If you absolutely want your own ISBNs, you can get them for free as a Canadian citizen http://www.collectionscanada.gc.ca/ciss-ssci/index-e.html

  3. Steve another question did you have to format your ebook in a specific way according to the style guide on Smashwords ?

    • Absolutely! Of all the online vendors, Smashwords is the most capricious so it’s important that you abide by their formatting rules since your .doc file will be converted into a number of different formats. It’s a little daunting at first but you soon get the hang of it. If you stay away from fancy layouts, you should be fine.

      Remember that it will look different on an e-reader, that customers can customize the look on their devices, so there’s no need to get fancy.

  4. Thanks for a good post Steve.I gave up on getting an ITIN with the W8-Ben because of the Passport situation but I’ll be able to ask a passport office in the UK now if they’ll do a certified copy which should do the trick.The situation in our two countries is obviously alike.
    A handy post from Ramona too if you want to class yourself as a firm. Hey, maybe we can get tax back if we pay editors, proof readers etc.
    Well done both and THANKS.

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