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Friday, August 30, 2013

Amazon KDP Want Your Tax Information Now!

Tax by Phillip, on Flickr
Creative Commons Attribution-No Derivative Works 2.0 Generic License  by  Phillip 
I got a slightly worrying email from Amazon this morning. This is how it started:

"In order for Amazon to comply with U.S. tax reporting regulations, it is required that all KDP publishers provide valid taxpayer identification. Our records are showing we haven’t received valid tax information for your account yet. To ensure you may continue selling on Amazon, please complete your tax information by 10/25/2013."

So Amazon are now saying that if you have published any Kindle e-books using Kindle Direct Publishing, unless you provide the tax information they need to satisfy the US tax authorities, your titles may be removed from sale. This applies even if (like me) you are not a US resident or citizen and not liable to pay US taxes.

To be honest I have been a bit slow to get my full tax details onto Amazon's system, since I use my Kindle e-books more as a way of generating leads and interest in my courses rather than a major income stream in its own right. Still, I do intend to publish more on Kindle and had been intending to update my tax info anyway, so this email gave me all the incentive (and more!) I needed to get the job done.

What Amazon want you to do, it transpires, is complete an online "tax interview". That's a scary-sounding way of putting it, but it basically involves completing a series of online forms. These start by establishing where you live for tax purposes. According to how you answer, you are then taken to an online version of the appropriate IRS tax form. In the case of a non-US citizen like me, this will probably be form W8-BEN (see below).
 The form appears on the Amazon site pre-populated with the information you provided earlier in the "interview". If you are happy with this, you can opt to have Amazon submit it electronically on your behalf. I was slightly confused at this point in the process, but it appears you do NOT need to enter your name on the online tax form itself (although it appears possible to do so) but just click below it to confirm. An electronic signature form will then appear on which you can enter your full name and a few other details. This is apparently deemed sufficient to qualify as a signature for tax purposes.

And that's it, basically, although there does remain the vexed question of withholding tax. As you may well know, even if you are a non-US citizen and your country has a tax treaty with the US (many do), you will still have to provide a US taxpayer identification number or 30% tax will be deducted from your US sales. (Incidentally, I only just discovered that if you live in the EU, they won't deduct US tax from your sales in Europe, even if you don't have a US TIN. I'm not sure if that was always the case, or it's a recent change.)

Anyway, if you're not a US citizen and want to avoid having tax deducted from your US sales, you will need to contact the IRS and get an ITIN (individual taxpayer identification number) or an EIN (employer identification number).

The consensus nowadays is that an EIN is more straightforward to obtain, and you can get one even if you are a sole trader. You don't need to be set up as a company or employ anyone else. I discussed this a while ago in this blog post, which is still pretty much how things stand. I am now even more confident than when I wrote that post that applying for an EIN is the way to go.

For non-US authors, incidentally, the most comprehensive guide I have seen to this subject comes from an Italian author called Giulio Sanguinetti and is called Royalties for Your Books: How to Avoid Withholding. This Kindle e-book covers applying for an EIN by fax or letter as well as by phone (the quickest way, though some do find ringing the IRS in America a bit daunting). You have to make allowance for the fact that English is not the author's first language, but nonetheless I found it a very useful source of information.

If you have any comments or questions about registering your tax information with Amazon, please feel free to post them below. I can't promise I will be able to answer your question, but maybe another reader will!

UPDATE: Check out also this post by UK writer Caroline Gebbie on how she applied for an EIN by phone and successfully completed the Amazon tax interview, in order to avoid paying the withholding tax.

See also this excellent post by Amanda Martin on how she applied for her EIN by fax.

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45 Comments:

Blogger Janet Matthews said...

Nick - you are right in saying that the EIN is the most straightforward way to go. I had one some years ago for another US business I belonged to.

I believe you can now phone the IRS and they will sort a number out for you there and then. Interestingly everyone seemed to get this notification whether they had already sorted their W8 BEN or not. I sent mine off manually in January and received email confirmation of its arrival, but still got this officious form on my kdp account page

2:23 PM  
Blogger Nick said...

Thanks, Janet. Yes, the IRS phone number can be found in my other blog post, which I linked to in the article. This is certainly the quickest way to get it sorted out, though it's important to have all the necessary info to hand before calling them.

6:00 PM  
Anonymous Anonymous said...

Hi Nick,

Great post. I've attempted to input my info several times and keep getting IRS error messages. I have an ITIN and CreateSpace has accepted my W8 information, but the KDP process seems to be a bit screwy. Two emails to KDP has gotten me nowhere, any thoughts?

1:04 AM  
Blogger Nick said...

Not really, I'm afraid. You're not attempting to "sign" the IRS form directly, are you? That's one mistake I made, but it appears you have to click on to the next page of the "interview" and complete Amazon's electronic signature field instead.

Otherwise, I don't know, really. Keep trying KDP support, I guess. I imagine they are probably inundated at the moment!

10:48 AM  
Blogger Donna Hosie said...

I did this before my books went live. There's nothing to worry about and it really is very easy. I live in Australia and so Amazon withhold only 10% instead of the higher rate.

It is absolutely in an authors best interest to fill in this form.

11:08 AM  
Blogger Arlee Bird said...

This is something which I've been intending to research. Not selling Kindle or any of my published books(not having any), but just selling stuff on Amazon and similar places. Taxes are so annoying.

Lee
Tossing It Out

6:10 PM  
Anonymous Caroline Gebbie said...

Do you have to get your EIN before you fill out the questionnaire or can you get it later? Been putting this of as my UK sales are going really well and US not so much.

7:51 PM  
Blogger Nick said...

Hi Caroline. You can get it later if you want. It's always possible to update your tax info via the Your Account link on your KDP Bookshelf.

In your case it might be as well to complete the tax interview now, to ensure you aren't taxed on your UK (and other European) earnings. You can always add an EIN later to avoid the 30% withholding tax on earnings from Amazon.com, Amazon.ca and so on.

9:15 PM  
Anonymous Caroline Gebbie said...

Thanks Nick, I actually decided to go ahead and do it all. I got the EIN and did the interview all very easy, thanks for giving us this information. For anyone still in the process, I've put exactly what I did on my website. http://www.carolinegebbie.com/

I've been procrastinating about this for ages and thanks to your article got it all done now.

8:49 PM  
Blogger Nick said...

Thanks, Caroline, and congratulations on successfully completing the process. I have shared your excellent post via Facebook, Twitter and Google Plus.

9:59 AM  
Blogger Nick said...

Actually, I think I will also add a link to your article in the body of my post, as it complements it so well.

10:08 AM  
Blogger J.C. Martin said...

Thanks Nick for this, I've been putting this off as it seemed daunting and I'm in the midst of emigrating. Wonder if I'll have to redo it all once I pay tax in a different country?

10:44 AM  
Blogger Nick said...

Thanks, J.C. I'm pretty sure you will, I'm afraid!

11:02 AM  
Blogger Rob Innis said...

Yes I was a bit surprised to receive their email informing me this was now a necessary process (bit ironic given Amazon's tax paying track record?) Anyway just bitten the bullet and given I have virtually no US sales (mine are Uk/Spanish)I have confirmed I am not a US tax citizen so job done. I hope.

2:33 PM  
Blogger Nick said...

Thanks, Rob. Yes, if you're not bothered about the withholding tax, that's all you need to do.

In the 'Your Account' area of your KDP Bookshelf, it should display a message that your tax information is up to date and that your current rate of withholding tax is 30%.

When and if you get an EIN you can repeat the tax interview and add this info, and the withholding rate displayed should then reduce to 0% (for the UK).

2:48 PM  
Blogger Nick said...

Where I wrote "for the UK" above, I should perhaps have put "for UK citizens". Hope that's all clear now!

3:06 PM  
Anonymous Anonymous said...

Hi Nick,
Thanks for a very helpful post. I too, have received the same email yesterday and it all seemed quite daunting until I found your blog. I have browsed through the 'tax interview' but haven't completed it yet.
Where it requests a 'foreign tax identification number' did you give them your national insurance number?
Also, if my name is not required on the tax form (W-8BEN) should I delete it?
Thanks

8:41 PM  
Blogger Nick said...

Thanks for the queries, Anon - glad you found my post helpful!

No, I wouldn't recommend giving your NI number. If you are a UK taxpayer on self-assessment you should have a unique taxpayer reference (UTR) number allocated to you by HMRC - this is a 10-figure number without any letters. It should be quoted in any correspondence you receive from HMRC. If you aren't on self-assessment, I'd be inclined to leave this field blank. The form states that it is optional, and I very much doubt that the IRS will be interested anyway!

Not sure I understand your other query. You must have your name on the form, or how will they know who it refers to? If you go through the KDP tax interview, your name will appear on the W8-BEN by default, so I would recommend leaving it as it is.

Good luck! - Nick

11:11 AM  
OpenID writermummy said...

I also panicked when I got the notification from Amazon, even though phoning to get my EIN has been on my to-do list for a year! I did tried to call but they said I would be on hold for at least 30 mins and I didn't want that phone bill! So I faxed my forms and got my EIN in 4 working days. So easy. I wrote about it on my blog, if anyone else wants to take the fax route. http://writermummy.wordpress.com/2013/09/04/f-ein-tastic-2013-365-challenge-247/

8:13 AM  
Anonymous Chris said...

Does anyone understand the question about derivation of income? I've read it a few times and asked them to explain and I still don't get it!

10:55 AM  
Blogger Nick said...

Thanks for your comment, Amanda/writermummy. I've added a link to your excellent article from the main post.

2:41 PM  
Blogger Nick said...

Chris, the consensus seems to be that you should answer "No" to this question. This forum topic refers: https://kdp.amazon.com/community/message.jspa?messageID=638027 . I'm sorry you will have to copy and paste that link, but Blogger doesn't do links from comments very well.

2:43 PM  
Anonymous Anonymous said...

Thanks Nick,

It was this part of your blog that got me confused as to whether I should delete my name from the tax form:

"it appears you do NOT need to enter your name on the online tax form itself (although it appears possible to do so) but just click below it to confirm"

Do you know if the information submitted is passed on to the UK tax office? i.e Should we declare any royalties earned to the UK tax office?

Thanks

3:31 PM  
Blogger Nick said...

Ah, sorry if I confused you then. I just mean that when the form appears on screen during the tax interview there is no need to enter your name then, as it will be added automatically by Amazon after you have provided your electronic signature on the next screen.

I should say it is highly unlikely that the form will be passed to the UK tax authorities, as it is nothing to do with them. But yes, if you are a UK citizen your Amazon earnings are taxable here and you should declare them in the normal way. This is why you really don't want to pay tax to the IRS as well!

6:38 PM  
Blogger Gurpreet Kaur said...

I have signed up for KDP and during tax interviews they asked for Electronic Signature, I am not sure about it's safety, I have read about it's drawback.

I would like to know how many authors have opted for Electronic Signature and have they had any problems related with it?

6:54 AM  
Blogger Nick said...

Thank you, Gurpreet. I am not aware of any specific problems about using an electronic signature during the KDP tax interview. I used this method myself and everything seemed to go through without any problem. If anyone else would like to comment on this, feel free to do so below. Personally, though, I think you might do better raising this as a query on my forum at www.mywriterscircle.com.

9:45 AM  
Blogger David A. said...

Hello Nick, this might seem like a stupid question but how does one sign electronically? how did you go about it. I just received the message a couple of days back and have been all over the place looking for how to sign electronically.

8:38 AM  
Blogger Nick said...

Hi David. In the context of the Amazon tax form, all you have to do is type your name (and a few other details) in the box when requested. This is on the page of the tax interview directly after form W8-BEN. As I say in my post, all you have to do is click below the W8-BEN to confirm that the details on it are correct, and the signature box will then appear. Don't worry, you don't have to provide a facsimile of your actual signature!

9:37 AM  
Blogger David A. said...

thanks Nick, I actually thought it was something huge.

12:37 PM  
Blogger Nick said...

No worries. Glad I was able to help.

1:04 PM  
Blogger thebibleandthenews said...

I've heard of a TIN and an EIN. What do I ask for if I am Canadian? And does anyone know what a 'beneficial owner' is?

4:52 AM  
Blogger Nick said...

My understanding is that exactly the same guidelines apply to Canadians who want to avoid paying the US withholding tax. You are almost certainly better off applying for an EIN, as the process is far more straightforward.

The beneficial owner is simply the person who benefits from the income concerned - it's a bit of US tax jargon. Unless you are applying on behalf of a third party, it will almost certainly be you or your business.

There was a useful discussion about this general issue a while ago on my forum at http://mywriterscircle.com/index.php?topic=43340.0

If any Canadians out there care to add their own experiences, please feel free to do so!

10:03 AM  
Blogger thebibleandthenews said...

Thank you so much, Nick, and for answering so swiftly. I may be getting through this--got a letter from Amazon about it also. I know a Canadian who may have gone through it. I may get him to comment, or will comment on his behalf.

6:45 PM  
Blogger Vikram said...

Can I initially complete the tax interview without providing an EIN and then update the EIN later?

7:30 AM  
Blogger Nick said...

Nice to be asked an easy one! Yes, you can :)

7:07 PM  
Blogger quentin fogarty said...

Now that Amazon has an Australian site, does this mean that Australian authors do NOT have to fill in all of the US tax forms as previously? I used KDP to set up a book cover just yesterday but I was quickly directed to the template for the IRS. I would have thought that with Amazon now based in Australia, authors here can publish using KDP so long as they meet the local tax requirements for any income generated. Cheers. Q

1:36 AM  
Blogger Nick said...

Sorry, Quentin, but I'm pretty sure you will still have to complete the tax interview and fill out the IRS form. Amazon has a well-established UK store and I still have to do this!

The issue really arises because wherever you are based, you are likely to generate some sales in the US, and that is why the IRS gets involved. They want their share of the proceeds of US sales, unless you can prove that you are exempt from US taxation (or pay a lower rate) due to international tax treaties.

Even in Australia, there is no escaping the claws of the IRS, I'm afraid!

9:26 AM  
Blogger quentin fogarty said...

Thanks Nick. Appreciate your help. Cheers. Q

12:47 PM  
Blogger quentin fogarty said...

Hi Nick. I have another question that you or your bloggers might be able to answer. Two days ago I called the IRS from my home in Castlemaine, north of Melbourne, and obtained my EIN without any fuss. However, when I try to fill in my W-8BEN on the KDP site it always comes back with a message saying the information doesn't match the IRS records. The most obvious explanation is that the info has not yet been processed through the IRS record-keeping system, but from what I have been able to a ascertain once the EIN is granted you should be able to use it immediately. The only possible complication is that they asked me if I had a company and I said no and explained I had a trading name (which I gave them) and that I operate as a sole trader under an Australian Business Number. They did not ask for the number. I have tried to complete the KDP process both as an individual and separately using my trading name but nothing seems to work. Does anyone have any advice for me on this? I gather I still have two options - ring the IRS again and check my information or wait till they send me written confirmation and use that to populate the KDP site. Any help appreciated. Cheers. Quentin.

10:59 PM  
Blogger quentin fogarty said...

Nick. Just so I don't waste your time or that of your bloggers I did follow up my original query about my EIN with the IRS and they have told me it will take a couple of weeks for the information to be on their system and that I should wait for a confirmation letter and then enter my details. So, hopefully, all will be good. Cheers. Quentin.

11:29 PM  
Blogger Nick said...

Thanks, Quentin. Glad you were able to sort matters out. I suspect that the IRS may still have a bit of a backlog following the public sector shutdown in the US last year.

9:47 AM  
Blogger George Edy said...

Hello. I am a romanian citizen and I want to write a book for kids in English language with Amazon, but I don't understand what should I do concerning the tax information. Please , tell me what steps I should follow. Thanks a lot.

9:54 PM  
Blogger Nick said...

Hi George. You'll understand that I'm not a tax expert and I can't offer a consultancy service on tax matters. However, I understand that Romania has a tax treaty with the US, so by following the advice above you should be able to avoid (or at least reduce) the withholding tax.

My advice would be to go ahead and publish your e-book on KDP before you worry too much about this. Then complete the Amazon tax interview, which will ensure you don't pay any US taxes on your non-US earnings at least. If you wish you can also apply for an EIN as described above, and that will ensure that taxes are not deducted from your US earnings either.

Good luck!

9:43 AM  
Blogger George Edy said...

Thank you very much for your answer. ! , I'd like to get an EIN but I speak only a little English so my conversation is very simple, so I'm afraid of phoning to IRS.It's very possible that I don't understand what the person will ask me, so I'd prefer another way to get in touch with them. How anything else I could get my EIN?

7:37 PM  
Blogger Nick said...

Hi George

You can apply for an EIN by fax as well. It just takes a bit longer. There is a link to an article by Amanda Martin about this at the foot of my blog post. Good luck!

4:11 PM  

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