Getting Your US Royalties Tax Back – Non-American Authors – New Zealand Edition

It’s exciting – Amazon sent you a ROYALTY CHECK it’s less exciting when you notice they’ve withheld 30% of the gross amount for taxes :-) The money is not gone forever though – as a non-US resident author the process of getting your money back is not difficult. It involves some phone calls and a some paper work – that’s it. The process has simplified in the last year or so – so if you’ve found a guide which starts talking about needing to get an “apostilled” coy  of your passport – that’s all nonsense now. Here’s how it works 2013.  

The overall process is: 

  • get an US tax number called an EIN (NOT an ITIN – that way is the way of apostilled copies, Form W-7  and other nonsense). Even if you are a sole-trader, as I am, you can get an Employer Identification Number – it’s perfectly legit as a non-resident alien (as Americans so charmingly call foreigners) and MUCH easier than getting an ITIN 
  • tell Amazon and Smashwords of your new EIN – using a W-8BEN form this will stop them withholding 30% (the actual amount they will continue withhold depends on your country of tax residents: for New Zealanders it’s 5% for Australians 0%) 
  • if you have had any royalties withheld already – you will need to claim them back from the IRS (US tax department) using a 1040NR form.  UPDATE: You won’t get your previous over-paid tax back unless you go through the trauma of getting an ITIN
New Zealand Does Some Things Well: Lamb, Scenery, and Simple Tax Codes come to mind

New Zealand Does Some Things Well: Lamb  and Simple Tax Codes come to mind

Getting an EIN (Employer Indentification Number)

Before you call you will need: 

  • a way to call the US cheap: I use Skype my call was about an hour and cost about 10c – most of the time was on hold – so I wouldn’t use Telecom for this! 
  • plan the time of day/week the IRS office is open 7am-10pm Mon-Fri – but general advice appears that they are busiest in the mornings and less busy in the evenings.  You are calling Pennsylvania – so that is approximately NZDT:  middnight – 3pm Tues-Sat (timeandate.com for timezone conversions) 
  • a print out or on-screen copy of Form SS-4 – it’s the form they are going to fill in on your behalf, so they ask if you have a copy. YOU don’t actually need a copy  -just have it on a screen near you to follow along. 

The details are: 

  1. Call  001-267-941-1099 extension #3. You are calling for an Employer Identification Number (EIN) NOT an Individual Identification Number (ITIN). 
  2. After a wait of between 5 and 60 minutes you’ll be answered. You aren’t allowed to be on speaker phone, so do this with a headset is my recommendation (means you can do some work while you are on hold). 
  3. They will ask you if you are applying for an EIN for a foreign entity – the answer is YES 
  4. Ensure that you give them a legal name that matches your legal name with Amazon and other places you sell your book and your records with IRD in New Zealand. The spelling is critical – they will go over it a few times. 
  5. You don’t need a trading name. 
  6. If your postal address is different from your residential one then again you will need to clearly spell it out. This is a unit used to dealing with foreigners and they seem un-perturbed over my lack of a “state” or  “province”. 
  7. You are a “sole proprietor” 
  8. They will ask you if this is for compliance with withholding – the answer is YES 
  9. They will ask you if this is for e-books – the answer is YES. Or they may ask you what business you are in: “PUBLISHING” appears to cover it.
  10. They will give your EIN over the phone – write it down – and double-check the number. 
  11. Eventually the paper copy will turn up, mine went via the UK for some reason! That paper is VERY important, original document,  not the cheap computer-generated print-out it looks like. KEEP IT SAFE you can’t get a copy – apparently. 

Telling Distributors about your EIN

You need to send a physical paper copy of a W8-BEN form to the places that have or will withhold taxes on your behalf. For most of us this is: 

  • Amazon.com
  • Smashwords.com 

Completing a W-8BEN

Go and get a copy of the form from the US IRS site here -. Print it out nice and legibly on white paper with black ink. Find a pen – file it in so your name and address and your EIN  the details should match those you just gave the IRS. Do not abbreviate. You don’t live in NZ – you live in New Zealand.  Do not photocopy the completed form – do an original for each distributor you are sending it to. 

Question 9

cross a) and enter New Zealand 

cross b) leave the rest blank 

Question 10

For New Zealanders the answers are: 

article 12 

rate 5%

type of income: royalty

Sign and date the form and send it to: 

Amazon: address for W8-BEN Amazon will send you an email in a few weeks to acknowledge receipt and in your next cheque you’ll notice the different rate of withholding applied. 

Smashwords: address for W8-BEN - update the EIN on your account page, and send to the address provided. Once received the hold for payments will be automatically removed and the withholding rate changed to 5% 

You apparently have to re-do this print out and mail nonsense every three years. 

I Want My Money Back! 

If you did all the above before you sold any books then you can stop now. However, for the rest of us who  have procrastinated about getting our tax affairs in order, and will now have to one more fun step to get your cash back! 

Smashwords defaults to holding your royalties until you have filed a tax number with them, as they only pay four times a year, it’s worth timing getting your EIN to fit with their payout dates. Amazon however may well have withheld more tax than is necessary. Amazon can’t give it back to you – only the IRS can do that.  

The US tax year ends on the 31 December – and some time afterwards Amazon will send you a 1042-S – I  received mine in March – so the timing is not bad for the NZ tax year date of 31 March. 

The 1042-S states how much Federal Tax has been withheld and your gross income.  

For New Zealanders you can get most of that back. The last 5% you claim against your New Zealand tax. No you can’t just claim it all against your NZ tax – only that 5% which is legitimate under the relevant tax treaty. 

Filling in a 1040NR Getting Your US Tax Back

Okay the form you can find here: The instructions all 19 pages – here

You will also need your 1042-S from Amazon (and any other US distributors) which say how much tax has been withheld. 

I’m making some assumptions here: you aren’t an expatriate American, you don’t run a business in the US or have employees there. On page 4 of the instructions you should qualify for the “simplified procedure for claiming certain refunds” . (Yes after this you will never hate the IRD again!). 

Basically if you are/have : 

  • non-resident alien
  • don’t have a business in the US
  • no income connected with a US business 
  • you don’t owe the US any tax 
  • you are using the form ONLY to claim a refund of tax withheld at source

You can now fill the form as follows: 

Page 1: make sure you name, addresses and EIN are as previously given to the IRS. Leave the rest of the page blank. 

Page 3: leave blank

Page 4: Royalties are item #5 enter the amount of Gross Income  from the 1042-S (box 2)  that Amazon sent you. Enter under  column (d)(Other Specify) 5% . 

Follow the simple arithmetic as indicated in lines 13, 14, 15 . This figure is what you owe  the US IRS (which you can claim back via your New Zealand tax). Copy this figure to page 2 line 53

Page 5: answer all question. Most are straightforward and relate to your citizenship, residency and trips to the US. 

For item L leave blank

Now back to page 2 

You already have the estimated tax to pay on your royalties @ 5% on line 53

Line 60 – is probably the same as line 53 

Line 61(D) is the amount Federal tax withheld from box #7 on your 1042-S form(s) (total if you have more than one). Enter this

Line69,70 – simple maths. 

Line 71A – you want the amount REFUNDED to you – they will send a US$ check to your postal address on page 1. 

Sign and date form. 

You’ll need to attach part of the 1042-S send to you from Amazon (Copy C – attach to any Federal Tax Return). Attach form to the left margin of page 1. 

Mail to 

Department of the Treasury 

Internal Revenue Service 

Austin, TX 73301-0215

USA 

The return is due before the 15 April, though as they owe you money I don’t think they will care if you are late!  

Update: Unfortunately all I got back was a letter telling me EIN  did not match an SSN or ITIN. I called and after talking to several people at IRS I discovered that I couldn’t get my overpaid tax back with and EIN. Most annoying! 

 Standard Disclaimer: I am not a tax accountant, but I have done taxes in a few countries – and I have great deal of sympathy for my American friends who have to deal with level of literal paper work. 

Your mileage may vary – if in doubt – check with a tax professional. 

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35 Responses to “Getting Your US Royalties Tax Back – Non-American Authors – New Zealand Edition”

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  1. Amit says:

    So the question that I have are :

    1) How do you get 1042-S from Amazon and from Smashwords . Do they send it your address .. I have not seen anything sent to me for 2012. So was wondering ?
    2) The refund will be sent by IRS via Check I assume to your non-US address. I hope they do that and send it to non-US address.

    • Lis Sowerbutts says:

      You will get the 1042-S sent to you from Amazon for sure and Smashwords if they’ve withheld any tax at the 30% rate (they hadn’t for me). I got the Amazon form today which is what prompted this post! I have no US address – the IRS will send me a check to NZ the same way as Amazon and others have for years. The bummer is that it takes weeks for the check to clear in NZ – can’t do anything about that unfortunately :-(

      I’m not holding my breath on the refund check being prompt – I would think this is a busy time of year for the IRS – and the whole system seems very paper focussed (I haven’t filled in a paper form for my own government for years).

  2. Dave Starr says:

    Lis,

    This is great info for the “non-resident aliens” of the world. For years I have noticed a lot of non-US citizens getting screwed by having taxes withheld by the US and not know how or taking the time to file US taxes to reclaim these funds.

    Nobody I know likes taxes in almost any country. And when you are the citizen of some other country aside from the US, and then have to file US taxes on top of your own tax burden … well nobody’s going to be happy about that, for sure.

    But as you point out, getting back most (or all, depending on your home country’s tax treaties with the USA is a heck of a lot better than a poke in the eye with a sharp stick.

    We’ve mentioned before, a huge money making niche that is virtually ignore is helping online entrepreneurs, both US and non-US people online. Most accounts, tax professionals, etc. are totally unused to the online world … and if you are planning to make money online, you HAVE to run things like a business, regardless of what country’s passport you carry.

  3. Lis Sowerbutts says:

    There is so much mis-information out there on this one David! When I actually looked into it – it’s not difficult to do and cost me about $2 in terms of phone calls and postage – they don’t own me a fortune but they do owe me enough to make the effort worthwhile

  4. Dave says:

    Great write-up Lis. We are printing out the forms now to get our tax baxk. Had the letter from Amazon yesterday saying how much we are owed, it’s a nice little bonus.

  5. Wendy Smith says:

    I called the IRS this morning and followed the instructions above, absolutely perfect. Call was 48 minutes in total with about 40 of it holding but I got what I wanted. :)

    Thank you so much, now to go follow the rest of the instructions!

  6. Bruce says:

    To be honest I’d totally forgotten that Amazon were withholding the 30% on me, but got reminded when I received the 1042-S form last week. Had a snowbound day today,so dug out your post & followed everything through. Perfect! I was only on hold for about 5 minutes before I had my number, & sent the form into Amazon.

    Then onto the IRS stuff, equally simple. I should have the complete amount withheld refunded me, (I guess Canada has a better tax treaty than NZ!)

    Without your post I’d probably said to hell with it! Many thanks – great post/instructions.

  7. Tasman G says:

    Lis, thank you a million times over for this information. Your post is so timely because the EIN is on this week’s to-do list. I’ve copied down all sorts of instructions from the net for this task and yours is the most clear, concise easy-to-follow instructions I’ve come across. I really appreciate it.
    Thank you.

  8. Ieesh says:

    Lis, I got the 1042-S form Amazon yesterday only ..Can I still get the tax back as I have already crossed the 15April deadline?

  9. Lietha says:

    Great advice. Worked for me and I’m from Canada!!!

  10. Sandor says:

    If I am living in European Union, may I get EIN number with the same procedures?

    (I am going to publish my first book.)

    Thank you for your answers, Sandor

  11. I’ve been meaning to do this for a while, but as we don’t have a landline or Skype, I’ve been putting it off. Now I’ve just reread your explanation and noticed a snag – does that mean if I’ve published my book using a pen name, it won’t work?

    • Lis Sowerbutts says:

      I don’t see a problem – obviously your IRS account has to be in our real name – same as your KDP account – the pename is just the name showing on your book.

  12. A says:

    This is great info, thanks! As a new author also from NZ, this whole process seemed so daunting.

    Two questions first before I call for my EIN number:

    1. On Amazon’s FAQ about self-publishing, they have two example forms filled out. One is for “Individual – Claiming Tax Treaty Benefits” and the other is “Non-Individual – claiming Tax Treaty Benefits”. I’ve noticed that the box for an EIN is selected ONLY on the form for a non-individual, and the ‘name’ given there is a publishing company name. For the other form (for an individual), the ‘SSN or ITIN’ box is selected. Does that mean to use an EIN on the form, I need to register under a publishing name and using the non-individual form? I’d really rather just use my real name, I think that would save a lot of hassles.

    2. The checks that get sent out by Amazon are in USD, am I able to give them to my bank to convert to NZD and cash in the check? How does that process go? (I know this is a question I can ask my bank, I’m just asking you because I don’t know anyone who has attempted to cash in a USD check).

    Thanks for your help, and for your great detailed instructions above!

    • Lis Sowerbutts says:

      Hi fellow Kiwi – I registered with an EIN and they immediately switched my tax rate to 5% – so that seems to work fine, regardless of their FAQ.

      We are very, very lucky in New Zealand, you can present a US$ check to be put into you bank account you’re be charged 5c for the overseas check -the Australians pay about A$10! You can’t cash it per se though – instead you will need to credit it to an account and wait for 21 (25?) WORKING days for it to clear – it takes ages anyway. They will give you the US$ exchange rate of the day – welcome to the world of bemoaning the high NZ$ ! The same works for euros and stirling too. Amazon pays out separately for the three currencies, all with a minimum payout amount of 100 (euros, US$ or Stirling).

  13. Woo Hoo! Wonderful tips and help.

    It took me 20 minutes, EIN in hand.

    Thanks

  14. Kate says:

    Hi Lis, thank you so much for the wonderful advice. I managed to get my EIN number so easily, I think I was on the phone for about 5 minutes in total!! Now its time to claim back from the IRS, I have looked into agencies who do this for you but am reading far too many bad reviews so will do it myself directly. Would you have any advice on this? Obviously your above post about filling out a 1040NR can’t be done if you have an EIN which I have….yikes!! Does that mean I have to go ahead and get my ITIN now? Any help or advice would be so appreciated, I’m lost!!!

    Thank you
    Kate :)

  15. Truly superb advice Lis. So detailed and helpful

    Thank you!!

  16. Marianne says:

    Have nine books placed on Amazon and was in the understanding that I would be paid by cheque for the royalties. I was then told that I have to do a tax interview and the questions did not make sense and I was blocked out on various fields.
    How do I get the royalty payments.
    The rest of the paperwork sounds horrific when you talk about contacting America for the other tax forms. Just need some money right now. Help.!!!

    • Lis Sowerbutts says:

      You answer the questions of the tax interview and then you will be unblocked -I’ve done it several times for myself and for clients – it didn’t appear opaque – and I don’t even understand US tax law. If you want your royalties – follow the steps and you’re get it.

  17. Yvonne says:

    Hi Lis,
    I am looking to publish my first book within the next week or two on amazon. I usually contract and work through my company here in NZ. Would you happen to know how that might impact the obtaining if the EIN? I already have an amazon account but only in my own name – would you know if I might need to start a new account in my company name…or would that be too complicated do you think? Thanks in advance.

    • Lis Sowerbutts says:

      No you can’t and shouldn’t start a new account in your company name – you can list your company as the book’s publisher if you wish though. Might be worth checking with your NZ accountant – but basically I don’t think it will make any difference – once Amazon stops withholding the higher amount you just claim the 10% left against your NZ tax

      • Yvonne says:

        Cool – thanks for the advice, Liz. All seems rather daunting I have to say, but I will press on.
        Have you published on Lulu? Do you know much about it for international (NZ) authors?

        • Lis Sowerbutts says:

          I’ve looked at them all, I help clients with this type of work frequently, and hand’s down the easiest to use is Createspace for print-on-demand Amazon (KDP) for Kindle books and Smashwords for distribution to other eBook retailers (they need ePub).

          There can be quite a few steps – but it’s not too complex

        • @Yvonne, Lissie is absolutely right about Smashwords and Kindle being the best options for the electronic version of your book.

          It is a good idea to offer a printed version of your book, too, for those that want it – and Lulu.com is one way of doing that. However if you’re finding all this daunting, you might want to start with the ebooks and leave the Print On Demand version for later – if you think the formatting for an ebook is bad…

          I’m in that position, I still haven’t gotten around to a POD version but when I do, I agree with Lissie – I’ll be using Createspace. I hate to say it because I don’t particularly like Amazon, but my research suggests the quality is better, the sizes are more suitable, and the opportunities for marketing are better.

          • Yvonne says:

            Thanks so much for your advice, Marisa.

            Yes, I’ll probably keep this first book digital for now due to the time critical nature of the information I have to get out there – I have a warning for people. I thought Amazon best to start with due to the broad readership.
            I have been considering the royalty aspect (because I need the funds – though it doesn’t sound like those will be rolling in very quickly at all), but getting the information distributed is most important.

            • Yvonne, it’s great that you’ve found Lissie’s site because her advice on ebooks is great. One thing to remember is that no matter where you publish your ebook, that doesn’t mean it will sell. My book has not sold on Amazon at all – most of my sales are on iTunes, and I don’t even deal with iTunes! Publishing on Smashwords means that you can also get published at Barnes & Noble, iTunes, and a whole range of other ebook stores, which increases its chances of getting noticed.

  18. Yvonne says:

    Thats good to know – thanks so much, Marisa. I’ll make some investigations in the next day or so. It’s so important as many people get access to it as possible.

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