All Things Come to Those Who Wait:Even your ITIN from the IRS!

Celia and John Lee explain the intricacies of applying for an ITIN to avoid paying US tax on US contracts.

In December 2008 Andrew secured for us a contract with Palgrave Macmillan New York to publish our new book, The Churchills: A Family Portrait, based on our exclusive access to a large tranche of family papers that had not been in the public domain before. By bringing Winston’s brother, Jack, back into the family story we were able to revise many popular misconceptions about the great Churchill family.

Andrew warned us that contracts with American publishers were slightly complicated by their tax rules. Authors require an Individual Taxpayer Identification Number (ITIN) from the Inland Revenue Service (IRS), without which our dollar payments would be very heavily taxed, and any effort to recover excess tax paid would be a long and wearing battle with bureaucracy.

One of the jewels of the Andrew Lownie Literary Agency website is an article posted in October 2004 by Neil McKenna in which he explains the procedure to be followed. He saves hours in the filling in of forms, and weeks if you had to try and understand the forms unaided!

First go to the website and download Form W-7, which is the initial request for an ITIN. This is where Neil’s article is so helpful. After ticking the ‘obvious’ box – that you are a non-resident alien claiming a tax treaty benefit – it is vital that you tick Box H (marked ‘Other’) and write in “Exception 1”. This means you own an asset (your book) that will generate income in the USA. The name of the treaty country is to be filled in as ‘United Kingdom’, but the real clincher is to find the box marked ‘Treaty Article Number’ and write in ‘Article 12 – Book Royalties’.

Because we live in London it was easy for Celia and I to travel up to the US Embassy and avail ourselves of the Walk-In Service of the IRS (Tuesday to Thursday, 9.00am to 4.00pm, no appointments needed). After battling through the heavy security systems, we found ourselves in a small office manned by two delightful American employees of the dreaded IRS.

I cannot tell you how impressed they were by the way we had filled in W-7, especially that bit about Article 12 – Book Royalties. We had overheard some other conversations about tax affairs, usually by hapless American citizens trying to understand their own tax rules. The two guys behind the counter would groan and sigh, and utter imprecations against tax advisors who had sent their clients so ill-prepared to their doom at the hands of the IRS! But we breezed through the whole process in minutes, thanks to Neil McKenna.

Now here is the first point to note that we can contribute to this process. We were told it takes 120 days to issue an ITIN. This was a bit of a blow. It is no use trying to start the process any sooner because you need to take your American contract with you, for them to photocopy and attach to your application. (We don’t know whether, if you are mailing your application in to the Embassy, you need to send the original and keep a photocopy for yourself, or vice versa).

We asked in all seriousness whether we could pay a premium of some sort to speed this process up, as you can with a visa application in many places. This amused them greatly (!), and not only was the answer ‘No’, but we were warned that if we hadn’t heard anything in 120 days we should ‘get in touch’.

Guess what? After slightly more that 120 days (we had been away for a while) there was not a peep, so we went back up to the IRS office. As soon as we said we were awaiting our ITINs the staff said, “I bet this is to do with book royalties, isn’t it?” It was and they explained that the IRS had got itself into a colossal mess early in 2009 when it dreamed up the notion that every author publishing in the USA should have their own corporate account with the IRS. Luckily the American publishers moved quickly to point out that it was they who had the corporate accounts in the USA and the authors were those ‘non resident aliens’ with rights to treaty exemptions referred to above. So we were promised that our ITINs would be with us in week or so. The nice people at the London office (the same who had seen us before) did a quick double-check that our paperwork was in the system. (It wasn’t but that is another story and not really relevant to this uplifting tale). They then helped us fill in Form 8-BEN (which is pretty straightforward, and you could do it unaided), which is the form you send to your publishers once you have received your ITIN from the USA.

Be of good cheer! Our ITINs arrived in about a week, we mailed our completed W-8BENs to New York and our American publishers, conscious that we were owed money under the terms of our contract, whizzed the cash over to Andrew a.s.a.p.

So, whether you live in or near London or not, download those two forms and fill them in with confidence as guided by Neil McKenna. From mid-2009 there should be no reason why your ITIN should take longer than 120 days and your properly completed W-8BEN will secure your payment from your US publisher forthwith.