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.

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