Pub Rants

God Bless International Tax Attorneys

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STATUS: I’m generally annoyed but can’t really talk much about why. Maybe later. In good news though, Ally Carter is still on the NYT list. Yahoo! CROSS MY HEART has been on for 8 weeks and is at #6. I’D TELL YOU I LOVE YOU has now been on for 3 weeks and we’re holding on to the #2 spot. Now that never fails to bring a smile to my face.

What’s playing on the iPod right now? THE BIG SKY by Kate Bush

IRS—that should sum up my day. Do you know what I did this week? I paid a nice hefty sum to my International tax attorney to write me up a memo that clearly outlines what the agency’s responsibilities are for tax withholding and reporting for my clients who are citizens of Australia, Ireland, and Canada.

This is something that should be accomplished via a free phone call to the IRS but after the fourth transfer and conflicting answers (see previous blog about this), I decided it was worth the money to confirm the letter of the law from an expert (and no, that would not be an IRS representative).

I have to say that Cara, the International Tax Attorney, is my new best friend. The minute I asked her my questions, it was clear that I was not speaking in a foreign language and she knew exactly what I was talking about. Such a pleasant experience.

This was a fifteen page memo that I’m really not going to sum up in one blog entry but I can hit on the high points.

And folks, I’m just sharing this for fun. This in no way substitutes for tax advice from a professional and should not be considered so.

1. Ascertain the foreign author’s country of permanent residence and whether they are a citizen there.

2. Check the tax treaty for specifics on what is the withholding percentage allowed as well as what type of royalty income is covered by the treaty. (For example, Ireland has 0% withholding on everything. Canada is also 0% withholding except for royalties earned from film/tv. Such fun to keep this all straight.)

3. Have foreign author complete W7 form for an ITIN (international tax id number) which will be needed for the W8BEN form which must be on file.

4. Have foreign author fill out the W8BEN form correctly. If they don’t, agency must withhold 30% for U.S. taxes regardless of what the tax treaty says (so this is crucial)

5. Report to the IRS amount withheld or not withheld on form 1042-S. If withholding was done, monies need to be sent to the IRS at a specific time and with a whole other form. The IRS can’t tell you what you actually need to do but woe is you if you don’t get it there in time.

So basically what I’m saying is that I’m good to go with any foreign author clients from Australia, Ireland, and Canada so query away.

If you are a non-US citizen and resident of somewhere else, it’s back to Cara and a whole new memo…and no, that wouldn’t keep me from taking you on but I’d have to especially love your manuscript to take on the trouble.

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32 Responses

  1. Anonymous said:

    Good luck getting your authors to apply for the ITIN, which requires them to mail off their passports to a foreign country and be grounded until such time as the bureaucrats are done with it.

    In my experience, major publishers do not ask for an ITIN to pay royalties, which is left blank on the W8-BEN. This means however that the W8-BEN must be filled out again every three years…

    Such has been my understanding.

  2. Caitlin said:

    And I’m an Australian citizen, resident in the UK for tax purposes. Oh dear! I guess I better get a UK agent then.

    My income this year (from freelance writing) has come from the UK, Australia, Austria, Germany and Hong Kong. Australia has already deducted 10% withholding tax but because they have a tax treaty with the UK, I’m meant to be able to get that back. My tax return and first payment is due in two weeks’ time. Ouch!

  3. tahariel said:

    If I wanted to submit to you, then, as a UK citizen living in the UK, would it make it less trouble for you if I did all the legwork for you (apart, obviously, from filling in the forms themselves) before I submitted, or would that be considered jumping the gun?

  4. Anonymous said:

    So if Mike Huckabee gets elected and the Fair Tax gets passed, I wonder if you’ll still have to go through trouble with foreign tax stuff?

  5. Anonymous said:

    You should be okay with a non-US citizen with a permanent residence status living in the US as long as they have a social security number and are legally allowed to work in the US. That’s what I am. If I can work anywhere in the US, I don’t see why you’d have a problem taking on someone with my status. So, don’t be afraid of non-US citizens, please!

  6. Marion Gropen said:

    You can apply the things your tax attorney told you to other countries with the use of the charts in this handy-dandy IRS publication:
    pub 901

    (NB: their verbal advice stinks, but the publications aren’t too bad.)

    I have had more than my share of run-ins with the IRS on international issues, including an audit of my company that lasted an unbearable 5 years. To find not one penny in error. Your tax dollars at work.

    You have my sympathy.

  7. Music Critic said:

    Tax season is upon us…it’s never fun. That’s why we have iPods. To listen as we crunch the numbers.

    However, Kate Bush wouldn’t make the iPod taxcut (pun intended), so unfortunately, she gets a low ranking. Same as yesterday. #7.

  8. Linnea said:

    I know nothing about taxes so I’m probably asking dumb questions. What is a withholding tax? Why is it held and do I ever get it back?

  9. Marion said:

    Withholding: An example you’re probably familiar with is the deduction of income tax withholding from your paycheck at work.

    When money is withheld, the payor sends it to the IRS, and gives the payee a statement at the end of the year. When you file your income taxes, you attach a copy, and deduct the amount withheld from the tax owed. If the leftovers are positive, you pay more. If not, you get a refund.

    More or less. HTH.

  10. Shari said:

    Someone commented about sending off passports when applying for an ITIN. Is that definitely required? If so, I guess I should apply for a passport (thinking positive that I’ll soon be needing that ITIN!).

  11. Cindy Procter-King said:

    I’ve been meaning to apply for an ITIN. But to give up my passport? Yikes. Better wait until after the SF conference and then be prepared not to go anywhere for holiday next winter….


    Thanks for the information, Kristin. I’m printing it out to see when and if it applies to my situation.


  12. Anonymous said:

    Unless it has changed, a passport was listed as part of the documents to provide in the ITIN application.

    Thinking that was insane, I tried calling the IRS to see if I could nip over the border and stop by an office with the documents. The phone number they provided on their website rang sixty times and was never picked up.

    Again, well-known agents and publishers continue to pay royalties to foreign authors and artists without an ITIN, but you must fill out the W8-BEN (which takes two minutes).

    Without an ITIN, the W8-BEN is only good for three years, as opposed to indefinitely. So three years later you will need to spend another two minutes filling out the form again.

    The tax attorney may disagree (and perhaps the IRS if they’d only pick up the friggin phone), but right or wrong this is definitely the way the current law is being interpreted by many in the industry.

  13. Kathleen Dante said:

    To anonymous 10:55 PM and everyone who asked about sending off your passport when applying for an ITIN, in my experience, that isn’t necessary. The IRS will accept a photocopy of the page of your passport that shows your personal details (in my case this was the first page); however, it has to be duly certified as a true copy by the issuing agency (in my case this involved seals on wax over a ribbon on the certification from the Department of Foreign Affairs, not just your run-of-the-mill certification).

    In my experience, not all publishers ask for an ITIN or a W-8BEN. However, it’s wrong to say that major publishers don’t ask for an ITIN to pay royalties. If the royalties are paid directly to the author and the author wishes to take advantage of the tax treaty his country of residence has with the US, the author needs to provide an ITIN; otherwise, the publisher is required to withhold 30% on the royalty payment. Also, if the author wants to claimi a tax refund, s/he needs an ITIN.

  14. Anonymous said:

    With all due respect, I get royalties paid to my address in Canada by one of the biggest publishers in the world without any withholding at all, as does my wife, and we do not have ITINs. We have been asked to fill out W8-BENs a few times after being informed they had expired.

    Again, I am not saying this is necessarily correct as I am no expert, but it is the way the law is being interpreted by at least one major corporation with an army of accountants and lawyers at their disposal.

  15. Michelle said:

    On a side note, I have lots of Kate Bush on my computer and my DD says it is weird. I love Kate Bush she was a favorite of mine in High school. It is nice to see some one still listens to her. 🙂


  16. Marion said:

    Anonymous at 1:50,

    There has been a recent change in the law, and you are now required to get an ITIN, using a W-7 form.

    I guess it’s to keep people with similar names separate?

    Whatever the reason, sooner or later your publisher will be asking you for the ITIN. Forewarned is forearmed.

  17. Jan Whitaker said:

    I’ll also put my $.03 in here. [note the inflation] I’m an ex-pat American with a SS# and still file taxes in the US, no choice. It sucks.

    Anyway, I would suggest not to assume that because a submission comes from overseas that it will come with hoops. But thanks for sharing, Kristin.

  18. Anónimo said:

    If you need help from any situation regarding Portugal, I will be very pleased to help you, just e-mail me. Thank you for sharing this, I will look for a British agent! Whish me luck!

  19. Nadine Dajani said:

    Hi Kristin,

    I’ve also called the IRS for info and they had no clue what to do with a Cayaman Islands resident (not a country with a tax treaty with the US). So if you’re willing to pass on your int’l tax attorney’s contact info to it would be very much appreciated!

  20. tax attorney said:

    Rather than conferring with a tax accountant or tax advisor it is the better to confer with a finance tax attorney for a legal advice. He can’t be dragged by the law to spill out any conversations that transpired between him and his client. Tax advisors are likely forced by the law to testify against an individual or organization that is facing charges on tax crimes. It is yet another significant matter to find the right finance tax attorney who is not only famous and reputable but also has the necessary skills that will save you from hot water.

  21. Anonymous said:

    Hi Kristin, I am a Tax law student. I am asked to answer “DO YOU NEED A W-8BEN IF YOU ARE PAYING A LAWYER,ACCOUNTANT OR A CONSULTANT IN CANADA?” & “WHAT TREATY IS U.S. AND CANADA BOUND BY FOR TAXATION PURPOSES”. I beleive you have the memo which answers both my questions. Can you please help me!



  22. Anonymous said:

    Hi there, I finished my assignment, though did not do a good job. In case if you still can share the excerpts from the memo which relates to these questions, please help.

    I have vivas coming up at the end of this month.

    Hoping to hear from you.

    Thank you,