If you’re not American, you might think you don’t have to deal with the IRS. But if you receive royalties from U.S companies, you do. Places like Amazon and Smashwords will withhold 30% of your royalties for the IRS. Can you get around it? Sure, if you live in a country that has a tax treaty with the U.S. and you file a W-8BEN form with each company. But it’s not as easy as filling out the W-8BENs and sending them in. You need what’s called an ITIN (Individual Taxpayer Identification Number).
Cheryl Kaye Tardif, a fellow Canadian indie author, has written a great post about how to go about obtaining an ITIN. I’m in the middle of that process right now. My application is “in the mail,” and if all goes well, I should have my ITIN by December 1st.
Like Cheryl, I used an acceptance agent. You can prepare the application yourself, but I’d read so many stories around the net about applications being rejected for the most trivial of reasons that I decided to pay an acceptance agent and increase my chances of having my application accepted the first time around. The other advantage to using an acceptance agent is that copies of your documents don’t have to be notarized. The acceptance agent vouches for them.
If you decide to do it on your own, the best ID to use is your passport. The IRS requires the original passport or a notarized copy. If you feel okay sending your passport through the mail and being without it for up to two months, go ahead, but personally I wouldn’t do that. However, the IRS is picky about notarized copies. It won’t accept a copy notarized by a Canadian notary, but it will accept a copy notarized by the issuer of the passport.
Fortunately the Canadian passport office will make a notarized copy of your passport—for free! Take your passport to your local office and explain why you need a notarized copy (taking along a copy of the ITIN application instructions would be a good idea). You’ll have to leave your passport with them for a few days, so don’t do this right before you’re about to travel.
Another option is to get an EIN, which is a tax ID for companies. Some people think it’s okay to get one of those as an individual self-publisher. Others don’t. If you’re interested in exploring this route, drop by Catherine Ryan Howard’s post about the subject.
Anyway, all of this is a PITA, and given how borders are meaningless (for the most part) on the internet, I hope tax laws designed for physical businesses will be modernized for those of us doing business on the net. I’m not holding my breath, though!