Tax headaches

There is probably nothing to make a group of writers disperse more quickly than by raising the subject of business and—gasp—tax.

The cliché goes that there is nothing certain except death and taxes, and so it is certain that as soon as a writer starts earning money, there will be a tax bill.

Worse, if you don’t live in the US and you’re selling books through Amazon or similar, that time will come sooner rather than later.

Because when you set up an Amazon account as seller, it asks for a mysterious thing called a social security number, or something called an ITIN. When you can’t provide this, every payment from Amazon will deduct tax.

Gasp.

After looking into the subject for a bit, I’ve decided that this sounds a whole lot worse than it is.

First of all, you can claim it back, or you can claim a tax offset against the tax you’ve already paid. In Australia, you would do that through this link. If you are elsewhere, it is likely that your local tax office provides similar advice.

Otherwise, it is possible for a non-US citizen to obtain an ITIN number. My writing friend Shayne Parkinson has written a six-page instruction on how to do this. Shayne lives in New Zealand, but the process would be similar in other countries. It can be quite expensive. I needed a notary public in December and was charged $100 for the service.

It’s my guess it’s only worth it if you make a lot of money (so you pay tax later) or if your country doesn’t recognise tax already paid in the US.

I will probably revisit this subject later.

If you appreciate Shayne’s information, please visit her Smashwords page here. Shayne writes historical fiction set in New Zealand and I recommend that you check out her work.

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7 comments on “Tax headaches

  1. I’m quite interested in what’s going to happen with tax this year as I’ll have made my first ever writing-related income.

    iirc, in the Australian tax return there is provision for hobby-related income and expenses which are then not subjected to income tax, and I assume mine will (this year at least) fall into this category as my normal professional income is many orders of magnitude larger.

    However, I worry that there comes a time when a growing income from writing finally crosses that threshold into proper taxable income, and knowing when that is – and putting away the tax ahead of time – is going to be an interesting problem to solve.

    • Beyond a certain income, you can no longer call it a hobby. I would advocate setting up as a sole trader, in which case you can also deduct your business expenses (con registration fees and travel!). An accountant should be able to help you with that.

  2. Thanks for this, Patty. I’ve been doing some reading on the tax thing so it’s great to hear from someone who has gone through the process. Shayne’s instructions are also very easy to follow! Very helpful.

    • We have a business, and when I mentioned this problem, my husband said: but you can get that tax credited against Australian tax, and I thought ‘of course’. The only reason why you might want to go through all this rigmarole of getting a US tax ID is probably if a serious lot of money is involved and you can earn by investing the money Amazon/Smashwords aren’t withholding until such time you have to hand it over to the tax man.

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  5. It’s probably worth updating this, because you don’t need an ITIN or a certified copy of a passport. You only need an EIN, and the process involves a ten-minute phone call to the US.

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