USA Taxes & Authors

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Though United States of America (USA) citizens may find the topic interesting this article is primarily for NON-USA based authors.

A large proportion of independent (indie) authors publish books through the utilisation of free software provided by USA based companies such as Amazon, Google Play, Smashwords, etc. Under USA tax legislation these companies are obliged to withhold thirty percent of business incomes unless appropriate documentation has been successfully submitted.

Some may ask why this is of any interest to them because they are not a USA based company and therefore are not subject to the withholding law. This is a miscomprehension. Authors need to understand authoring is in effect a business and though they may be based in another country their product (book), where they utilise the facilities of a USA based company, is created by and sold from a USA business. Consequently their business, for tax purposes, is considered to be USA based.

As a result of the above, if they wish to avoid having thirty percent withheld from their royalty payments, authors need to complete relevant documents. The regulations used to be quite complex but thankfully have been eased and now allow authors to claim exemption through various treaty agreements. Nevertheless, it can still be fairly complex unless the author takes time to understand the differences between their own national formatting styles and those of the USA.

Naturally, as with anything of this nature, there are a variety of forms, which to complete depends on the nature of the business. Authors should not assume theirs is a standard business because there are various ways of setting up author accounts. Most companies now provide easy to complete questionnaires that help identify the correct form. The advent of the internet and online activity also helps by enabling tax documents to be signed and submitted electronically. Nevertheless, there are elements that need to be clearly understood. For example there is date format. In the USA, dates are written as month; day; year whereas in the United Kingdom, dates are formatted as day; month; year. Other nations may have different formats. This may appear to be a simplistic matter however, it is understood, if a date is entered in a non-USA format it can result in the form being rejected.

Conclusion

Of course, it is not necessary for authors to submit a tax form but if they do not they must accept thirty percent will be withheld from their royalty payments. It is possible to reclaim the withheld amounts but it is a long and complicated process. Authors are advised to complete and submit appropriate documentation for EACH of the companies they publish through. The existence of all the treaty agreements make this even more sensible.

Though the questionnaires and forms may be fairly easy to complete there are differences in style and format which need to be taken into account. There is a useful book to help: Beyond Frontiers: US Taxes for International Self-Published Authors by Marcela Martinez Millan. Review may be read here.

Note: This topic was first discussed three years ago 6 December 2016 however, an occasional reminder does not hurt, and it is possible new authors may not be aware of the circumstance.


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