Your ITIN and You.

Your ITIN and you

Boggle as the intrepid author fights her way through the swamps of legalese! Gasp as she overcomes the clinging forests of red tape! Tremble as she asks the men with machine guns to stand aside and let her pass!

Well, OK, it probably isn’t possible to make a post about UK and USA tax arrangements interesting. Though men with machine guns really were involved, that was probably the least fraught thing about it. Instead I’ll try for clarity and usefulness.

If you’re a British author, being paid by an American publisher, the fact that you may get 30% more royalties if you read to the end will just have to be compensation for the dull subject

The Tax Treaty

American publishers have to pay American taxes to the IRS. If you are receiving royalties from an American firm, then the IRS are legally obliged to take 30% of your royalties in tax. You then get what remains.

However, the British tax man is legally obliged to tax you, as a British resident, on your income. So you will end up paying tax on the royalties which have already been taxed. You will end up being taxed twice on the same earnings.

This is so obviously unfair that everyone was agreed that something should be done about it. As a result the USA and the UK signed a tax treaty which means that UK residents only get taxed by the UK.

This is good news. However, this doesn’t all happen automatically. It’s up to you, the writer, to prove to the IRS that you (a) are a foreign national and therefore ought not to have to pay American tax and that (b) you are in fact getting paid by an American firm and not merely wasting their time.

The ITIN Number

In order to establish that you are receiving money which you will not be taxed for, you need to get yourself an ITIN number. This tells the IRS who you are, and tells them you are exempt from paying them tax.

If you do not get an ITIN number, your publisher will be legally obliged to give 30% of your royalties to the IRS. They are probably already doing this without letting you know about it. Not – I hasten to add – out of any malice, but just because unless you stand up and say ‘hey, I don’t pay tax in the USA and here’s my ITIN to prove it,’ they have no other option.

How Do I Get an ITIN Number?

Here is my recommended method. I have done this myself and found it surprisingly simple and effective.

First of all you get a copy of the form here: FW7

You fill this in to the best of your ability. (Foreign Tax number = National Insurance number).

What the IRS need is (a) Proof you are British.

(b) Proof you need an ITIN because you are being paid by an American company.

The only single document they will accept for (a) is your passport.

For (b) they will accept your contract as long as it mentions the fact that you are going to be paid royalties.

Now take your filled in FW7, your passport and your contract to the American Embassy in London:

http://www.usembassy.org.uk/ukaddres.html

And tell them that you want the IRS office. You will be passed through the queue at the gates faster than all the other people (who are waiting for Visas). You will have to go through a paranoid security check that even airports would think is a bit OTT, leaving all your electronics, including your watches and even your belts at the door. Then, holding on to your trousers, you can ask the machine-gun armed policemen at the checkpoint which way to go and you will be directed to the IRS office.

I arrived at about 2pm and the whole queuing and strip search business (I’m joking about the strip search btw!) only took about 15 minutes, after which I was the only person in the IRS office, and seen to immediately.

The IRS man filled in the bits of the form I could not manage (name and subsection of the tax treaty under which I was exempt), took my passport away for just long enough to photocopy it, kept the copy, and kept the printouts of my contract, handed me back my passport, and that was that. I still have to wait 120 days before I get an ITIN, which will be sent to my house, but at least I have the assurance that the form got past the IRS man, so it must at least be properly filled in.

Problems

(a) But what if I live a long way from London?

You are kind of stuffed. You can post your FW7, passport and contract to the IRS office in the Embassy (address above). If you want to risk sending your passport through the post, of course.

(a.i) can’t I send them a copy of my passport?

Not really. They will not accept a copy unless it is taken by an authorised notary or Acceptance Agent. Googling reveals two Acceptance Agents in the entire country and they are both in London.

Also, I feel I ought to mention that Acceptance Agents will charge you £450 for the privilege, *and* the IRS man was not aware that there were any authorised Acceptance Agents in the country, so the ones on Google may be dodgy.

Frankly, if you’re posting your passport to an Acceptance Agent to be officially copied, you might as well post it to the IRS office. If you don’t want to post it, you’re stuck with travelling to London yourself.

(b) What if I don’t have a passport?

The only single document they will accept for proof of identity is your passport. There is a list of other documents they may take instead in the instructions of the FW7. One of them, however *must* contain photo-ID. If you have no passport and no photo-driver’s licence, you are stuffed.

If you have a photo-driver’s licence and your birth certificate you may be OK with that, but again they must be the original documents. If you don’t want to post them and risk losing them, and/or them not being enough proof of identity anyway, you will have to take them to London yourself.

That stinks!

I know. But on the other hand you only need to get an ITIN once. After that you will have the same number throughout your writing career, and it will be saving you 30% of your royalties all the way. It has to be worth the expense of travelling to London for a day, or even overnight. It has to be less than paying an Acceptance Agent £450 for the privilege. And you can buy ‘I love London’ T-shirts on the way home

Hurray! I have my ITIN Number! It’s all over!

Well, almost but not quite! All your ITIN number does is prove you are not subject to US tax. If you want your publisher to be aware of this fact, you must then send your publisher a FW8BEN to inform them. Only after you’ve done that will the publisher be able to stop taking tax off the money that you’re going to be taxed on at home.