[UPDATE: Please see New tax rules for non-U.S. authors on KDP and CreateSpace for more recent information about tax withholding.]
Yesterday, while advising a client on how to fill out the paperwork for a non-U.S. resident author, I was surprised to see that the information on form W-8BEN had disappeared from the KDP website. I had been specifically trying to find the address for where to send the form, as I had inadvertently misplaced it, but could find absolutely nothing about it; now, their tax information is restricted to advice on applying for an Employer Identification Number (EIN) or an Individual Tax Identification Number (ITIN).
A few minutes later, as I was opening a Kindle account for this same client, I was broadsided by KDP’s new tax interview. This is now a mandatory exercise before authors are allowed to put a book on sale. The tax interview seeks to establish whether an author is a U.S. resident or not; if the latter, Amazon’s system generates a form W-8BEN and demands your electronic signature. If you refuse and elect to send in the paper form, Amazon will not put your book on sale until it receives your paperwork. Since you must first apply for the U.S. tax ID (the EIN or ITIN) before you need to fill out the W-8BEN, this can delay the sale of your book for months.
I find this disturbing on several levels. The first is that nowhere on the KDP site are authors warned of this new tax interview and are therefore not encouraged to learn about the issues before being hit with the demand to sign the form put in front of them.
The second, more frightening issue, is that you are required to confirm, by threat of perjury, that the contents of the form are true, and that you meet the legal requirements to file one. You may have no idea what a form W-8BEN is, yet I suspect most authors will just sign it despite the possible legal ramifications.
The third issue is that it isn’t necessary for Amazon to require authors to submit a form W-8BEN in order for Amazon to sell the author’s book(s) and issue royalties. In fact, as I did with this new client who has just begun the process of applying for her U.S. tax ID, I simply accepted the form as is, without a U.S. tax ID number inputted, and Amazon then returned a notification that it would be withholding 30% tax. This was the previous status quo: automatic withholding of 30% royalties, paid to the IRS, until you submitted a form W-8BEN containing your U.S. tax ID number and the relevant tax treaty information. Why Amazon now feel they have the right and the need to force authors without a U.S. tax ID to sign a useless W-8BEN — under threat of perjury no less — is beyond my understanding.
I suspect this new tax interview was deemed necessary due to too many foreign authors not understanding the tax issues and failing to provide the relevant forms, or not filling out the W-8BEN correctly. Yet would it not be better for Amazon’s system simply to inform any author unable to input a U.S. tax ID into the interview process that the consequence of not having said ID will result in an automatic 30% withholding tax? The interview process could then link to the KDP page on tax issues, where a more intelligent Amazon would again include ALL the relevant information. The author’s book could then still be put on sale, with the option to complete the tax interview at a later date when one has successfully received a U.S. tax ID.
I have completed all the relevant parts of publishing the book and am in the final part of the tax interview. But I have a confusion. I currently live in Oman but am a Pakistani, my passport is of Pakistan and my permanent address is there. My bank card is of Oman, however. I have an Omani resident card while my Pakistani resident card states as Overseas Pakistani. I don’t currently have a local Pakistan Identity card.
Should I get a national identity card made locally of Pakistan or will my overseas card do? I don’t want to face charges of perjury and am very confused. My mailing address is my Pakistan address, I have opted tax deductions from there but I am concerned if it will be valid seeing that I don’t have a local identity card from there nor a bank card.
Hi Saim,
I couldn’t give you advice here; it’s too legal. But if I were you I would contact Amazon, the IRS, and the Omani tax authorities and ask them. If you are resident in Oman, and if that is where you pay taxes (if there are income taxes) I would think to the IRS you live in Oman. You should read this post as well.
Lene, did you succeed in getting IRS approval and if so, how? I’m in the same situation of being a sole proprietor. I have an EIN, but Amazon won’t allow me to provide an EIN if I select Individual, and they rejected my information when I chose Corporation. I would love to hear how others have solved this issue.
Hi Eva,
The only resolution is to use your national tax ID instead. You still get your treaty rights because that is the new policy between the IRS and Amazon. Rather than fight to use your EIN, just play along and get your benefits. Select individual during the tax interview, and don’t input your EIN; input your national tax ID. See this later post for an explanation.
Hi Nick,
What’s important is that you recognize that you need to do some research rather than just answer the questions anyway. Things have also changed since I wrote this blog post; see this post on the changes.
I’m in the process of self publishing my first book. I understood that I would have to pay taxes but when faced with this so-called tax interview, I was just left confused and extremely weary of the whole process. I know little about taxes and really have no idea what I’m supposed to be filling in and what applies to me. Even with the help guide, there are terms that are not explained. Half way through I got scared and exited the interview. Looks like I’m going to have to do a bit of research before continuing!
I have the same problem. I have a sole propietorship in Norway, which has tax treaties with the US. And I have an EIN. Though I do very little business, and earn most of my income as an emplyee for another company.
I tried selecting Disregarded Entity, as the definition of it I could find online sounded a lot like sole propietor (at least to my non-lawyer ears). After answering the questions to the best of my ability, and actually getting to a field where it says I need to fill out IRS Form W-8IMY, and send that in.
Under it says that W-8IMY is not the correct form if I’m: “A non-U.S. individual or entity solely claiming foreign status or treaty benefits. Instead, Form W-8BEN or W-8BEN-E is the correct form.” Which I guess I am.
So, I went back and tried again as an Individual, using my Norwegian SSN equivelent for foreign TIN. This time around I got W-8BEN. This seems a bit safer, as I don’t want to commit perjury by misunderstanding the legal meaning of “Disregarded Entity”. 😛
This seems to have actually worked, and it now says will be withholding 0% of the tax, though I guess they still need to go through the information and validate it. So we’ll see how it goes.
To be honest, I found the whole process rather confusing.
Hi Ringo,
I just helped a friend set up her CreateSpace account and went through the tax interview with her. I take back part of my previous reply: there is a help link for the tax interview that is quite useful (https://www.createspace.com/tax-interview/help?nodeId=201447640&locale=en_US) though you can only access it once you set up your account; it would be better if Amazon linked to this from their public website and not just from within one’s account so that one could investigate and prepare in advance, especially as you have to attest to reading the relevant section of the tax treaty of your own country — how much would you wager that everyone just checks the box whether they read the thing or not? Anyhow, if you are a sole proprietor in Norway you are an individual for the purposes of the tax interview. There was nothing in the help section or the IRS pages Amazon links to that defines Disregarded Entity, but I suspect it is someone similar to a publisher or agent: “A person is not a beneficial owner of income, however, to the extent that the person is receiving the income as a nominee, agent, or custodian, or to the extent that the person is a conduit whose participation in a transaction is disregarded.”
This is just it: Amazon have done a poor job of explaining the situation, what the legal questions mean, and what the terms mean. Amazon need to add a page on the tax interview itself, with directions, but I suspect Amazon will not do so because then they could be accused of giving tax advice, which would open Amazon up to litigation by self-pubbed authors who don’t do their own homework. It’s a no-win situation for both parties.
Another thing about this interview that is absolutely crazy-making is that you can get caught in the loop of not providing the right information. This is partly by how the process is set up. For instance, I’m an individual beneficial owner and have an EIN, but if I tick off individual, the form will only allow me to use a SSN or ITIN. On the other hand, I can use an EIN if I take off Corporation, but then I get a throw back at me because according to the IRS, I am not a corporation. I am an individual beneficial owner. I’ve tried submitting this thing six times and it’s still not right. And in the meantime, I’m not getting paid.
According to one website I found, the definition of “individual beneficial owner” is “a person who enjoys the benefits of ownership even though title is in another name.” I know that some authors assign the benefits of their copyright to a corporation or other entity and then pay themselves a salary from that entity. But then one’s Amazon account would be held in the name of that entity, not the individual. Perhaps you have set up your account incorrectly. When I look at form SS-4, individual beneficial owner isn’t an option. Have you spoken to a tax attorney or CPA? The IRS? You can also try calling Amazon’s corporate head office in Seattle: 206-266-1000.