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Thread: ITIN in Non-Tax Treaty County


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Permlink Replies: 8 - Pages: 1 - Last Post: Mar 23, 2012 8:30 AM Last Post By: shadreamer
shadreamer

Posts: 7
Registered: 03/21/12
ITIN in Non-Tax Treaty County
Posted: Mar 21, 2012 8:50 AM
 
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Good Morning,

I see there are lots of threads for getting an ITIN or EIN in the US, UK or any country where there is an existing tax treaty to reduce tax deductions at source, but I live in a country where there is no existing tax treaty with the US. From what I can see, this means that I will lose 30% of my income for book sales on Amazon direct to the US Gov.

I am not American, nor will I ever live in the US so I am wondering how this can be redressed, if at all.

Under the 70% Amazon plan for book sales I lose 30% to Amazon for their cut, I lose another 30% to the US Gov and what is left is subject to my own countries significant bank transfer fees, foreign currency exchange fees and / or check cashing / deposit fees and taxes. Essentially, unless I have a runaway best seller I calculate that publishing will actually cost me money. It feels like I just took on the mafia as a business partner.

Has anyone else been through the same process and how, if at all, did you get through it?

Thanks.
andresanthomas

Posts: 4,921
Registered: 01/01/12
Re: ITIN in Non-Tax Treaty County
Posted: Mar 21, 2012 9:52 AM   in response to: shadreamer in response to: shadreamer
 
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That's the price you pay for selling in the US. I don't believe the 30% applies if you go through Amazon.co.uk or .de or .it, but then of course you don't have the same market available either.

Sorry.
clemlaw

Posts: 1,390
Registered: 06/10/11
Re: ITIN in Non-Tax Treaty County
Posted: Mar 21, 2012 10:34 AM   in response to: andresanthomas in response to: andresanthomas
 
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I'm not sure exactly how to address the situation, but by jumping through sufficient hoops, you should be able to avoid most of the taxes.

There is no 30% tax on your royalties. What happens is that in cases where Amazon doesn't have documentation of your U.S. Social Security number, they are required to withhold a certain amount (which I guess is 30%), which is credited against whatever taxes you might actually owe.

If you have a million dollars in royalties, then the tax rate is probably somewhere around 30%. But if your royalties are less than that, then the tax will be less than 30%. For example, let's assume that the tax actually works out to 5%. You have to pay the 5%, but the U.S. Government owes you the other 25%.

Since I'm in the U.S., I really don't know what the procedure is. But essentially, what you'll need to do is file a non-resident tax return. You'll calculate your tax, and also note how much was withheld. At that point, a cheeful civil servant will process your return and promptly send you a check for the difference. (Actually, I'm not positive about the "cheerful" and "prompt" part, but that's how it should work in theory.)

You might be able to avoid the problem entirely, as U.K. residents are able to do because of the tax treaty. Even for them, that entails jumping through multiple hoops. But I suspect that your only recourse is to file the non-resident tax return, and jump through whatever hoops are necessary to do that. Unfortunately, I don't know any details about the hoops.

The bottom line is that if the withholding is a fairly small amount of money, then it's probably not worth the trouble. We can use the money, and we'll probably spend it on a drone which we'll use to shoot people in your country.

If it's a significant amount of money (a couple hundred dollars, maybe), then it's probably worth it to you to figure out the hoops. The first year will probably involve a lot of bizarre bureaucratic requirements, but the second year will probably be a lot easier.

Yes, I know that we're the only country on Earth that decided that it can tax non-citizens anywhere in the world. As more and more of us figure this out, perhaps we'll change it. In the meantime, on behalf of the people of the United States, I would like to thank you for your contribution to the U.S. Treasury.
notjohn

Posts: 15,241
Registered: 01/06/10
Re: ITIN in Non-Tax Treaty County
Posted: Mar 21, 2012 11:52 AM   in response to: shadreamer in response to: shadreamer
 
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**I will lose 30% of my income for book sales on Amazon direct to the US Gov.**

No. It means you will have to file a tax return next spring in order to get a refund of some or all of the money. If you report it as "other income" (the easiest solution) then you will be taxed on anything above $3600 or $3700, I forget what the exemption now is. Look on irs.gov for the instructions for Form 1040-NR (non-resident). Even if you earn $5000 or $6000 you may find that the marginal tax rate is much less than 30 percent. (For Americans in the lowest taxable bracket, the rate is 10 percent. Dunno if that applies to non-residents.)

So you will almost certainly get a paper check from the IRS some time next year. (You will still eventually need an ITIN. You can simply write APPLIED FOR on your first tax return.)
notjohn

Posts: 15,241
Registered: 01/06/10
Re: ITIN in Non-Tax Treaty County
Posted: Mar 21, 2012 11:53 AM   in response to: clemlaw in response to: clemlaw
 
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**As more and more of us figure this out, perhaps we'll change it**

I think it's much more likely that other countries will follow the US model! It's a neat way to avoid raising taxes.
clemlaw

Posts: 1,390
Registered: 06/10/11
Re: ITIN in Non-Tax Treaty County
Posted: Mar 21, 2012 2:12 PM   in response to: notjohn in response to: notjohn
 
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For the system to work properly, you need to build drones so that you can shoot the tax evaders in other countries. That will cost money, so you'll need to raise the taxes higher. Then, you'll have more tax evaders, so you'll need to build more drones....
armyof1

Posts: 17
Registered: 03/01/12
Re: ITIN in Non-Tax Treaty County
Posted: Mar 21, 2012 6:05 PM   in response to: andresanthomas in response to: andresanthomas
 
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Stay clear of those who spend all their time on here giving advice to others. Based on the amount of free advice some here make, they would be better served finding a real job. The Dear Abby job is already taken John boi
joeveramu

Posts: 444
Registered: 01/21/11
Re: ITIN in Non-Tax Treaty County
Posted: Mar 21, 2012 8:41 PM   in response to: shadreamer in response to: shadreamer
 
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I am probably a good example: I live in a country with no tax treaty with the US so I pay 30% tax through earnings I receive from Smashwords through PayPal and cheques from Amazon. I write under my own name and 3 other pen names. But I don't mind because everyone has to pay taxes anyway. I checked with my country;s tax dept and was told that since my earnings is governed by a legally binding contract with Smashwords or Amazon that I am not subject to double taxation.
Almost all my sales are in the US. I have many US friends and visit frequently.
I personally don't have any problems paying the taxes.
Jay Veramu
shadreamer

Posts: 7
Registered: 03/21/12
Re: ITIN in Non-Tax Treaty County
Posted: Mar 23, 2012 8:30 AM   in response to: joeveramu in response to: joeveramu
 
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@ joeveramu

Have you been able to claim those taxes back through a tax refund as the others have suggested?
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