A guide to obtaining an American ITIN from the US IRS
28 Nov 2013
Christian Jennings, whose Bosnia’s Million Bones has just been published, explains how to obtain exemption from US withholding tax.
Everybody knows that they make films about Italian postmen. Il Postino, the love story set on the Italian islands of Procida and Salina, is proof of this. But I’m not sure they have yet set a film inside an Italian post-office. I reflected on this in Turin this year, one afternoon of burning summer heat, as I sat waiting to dispatch to the United States a heavy sheaf of paperwork directed to their Inland Revenue Service. The post office in Italy can be a lengthy process – you take a ticket and queue – and it gave me time to work out in my head the ultimate guide to getting an American tax number. For it was this purpose that the paperwork in my hands, with the address on the envelope addressed to somewhere in Texas, was intended.
One day, you may receive an email from Andrew telling you that an American publisher or publishers wants to buy the rights to your book. You will have every cause to celebrate. Shortly after accepting a publishers’ offer, however, it is likely that you will receive an email either from Andrew or the publisher telling you that, to avoid a heavy 30% tax payable to the US Inland Revenue on advance monies and royalties earned in the United States, you will need to get something called a U.S IRS ITIN.
This stands for a United States Inland Revenue Service Individual Taxpayer Identification Number. What it does, simply, is to make sure that you as a British author can receive the requisite tax status in the United States to ensure you are exempt from paying tax of 30% on your books’ proceeds in America. It is actually quite easy to get, requires a bit of time and patience, but is formulaic, and all you have to do is follow these steps. Every possible provision has been thought of in the following memo, and includes updates and changes to IRS policy made in early 2013, and help and advice for authors living inside and outside the UK.
A. Why do I have to get it? The answer is you don’t, but without it, you will lose 30% of your monies earned from your book in the US to their Inland Revenue.
B. What happens first? Well, let’s assume a US publisher has bought your book for an advance of $30,000, and you are immediately due, on signature of contact, 33%, or $10,000. And you don’t yet have an ITIN number. What will happen is that the publishers will offer to pay Andrew 70% of this sum – ie. $7,000 – and keep $3,000 back, on hold, until you get an ITIN number and send it to them, proving your right to exemption from US tax. Once you have your ITIN number and send it and the requisite form to them, the balance of monies withheld for tax is sent to Andrew.
C. Why would they do this? The Inland Revenue specifies that unless a ‘non-resident alien claiming tax treaty benefits with an ITIN’ provides proof of such status, 30% of their income from their book must be held back by the publishers until the author provides the latter with an ITIN and the necessary form proving tax exemption. This is based upon the relevant tax treaties signed between the U.S and Great Britain : but don’t worry. Getting the ITIN is relatively straightforward.
D. So what should I do? The answer is simple : Delta India November. Do It Now. Don’t procrastinate this, as it does take time, it won’t do itself, and each day you don’t do it is one day more you are away from your money. Fear not - the IRS are helpful and efficient.
E. What should I do next? Simple – do it properly, and if in doubt, consult. I speak not as a draconian Sergeant-Major, but from experience. Sending my W7 form off to America before Christmas 2012, from Sarajevo in Bosnia, I failed to triple-check the small print that said that accompanying identification documents must be certified in such a way by such a person or institution. Off I sent it, and I can only imagine that in an IRS warehouse in San Antonio or South Dakota or somewhere, my first application form is still sitting. Or it’s in a bin. Meaning I had to do it again.
F. What happens if I don’t do it straightaway, but leave it for a few months? Well, if you haven’t provided your US publisher with an ITIN number to recoup the 30% of funds owed to you, that they’ve kept back for tax, by the end of the given US financial year in which the money was due to you, the money will go to the IRS. Then it really is bureaucratic and difficult to get back, and you don’t want to go there.
G. So where do I start? Simple. The internet. Go to www.irs.org, and look for two forms called W8-BEN and W7. Download them and print a few times each. You’ll need a couple for practice. Print the guidelines to filling them in, too. Read the latter. Don’t immediately burst into tears. It’s OK. This guide is here to help.
H. Which one do I do first? W7 first, because you can’t fill in W8-BEN without having an ITIN number, and you can’t get this without filling in W7, which gets you the tax number. W8 is the form which declares you exempt from US tax, and W7 is the form that gets you the tax number required to prove this exemption.
I. Where on earth do I start? Damn good question. I’d suggest boiling the kettle, making a coffee, or opening a bottle of anything.
J. And then? Fill in form W7 as follows, in clear, non joined-up, completely legible capital letters, preferably in back or blue.
a. Tick Box ‘a.’ You are a non-resident alien required to obtain an ITIN to claim tax treaty benefits
b. Ignore boxes b,c,d,e,f,g
c. Tick box ‘h.’ Enter the words ‘EXCEPTION 1.’
d. Under ‘Additional information for a and f. Enter treaty country’ put “United Kingdom.” And under “and treaty article number” enter “ARTICLE 12. BOOK ROYALTIES.”
e. Then fill in the name boxes at 1a. Ignore 1b.
f. Then at Section 2 fill in ‘Applicant’s mailing address.’ Make sure this is an address that you are living at, so you can receive your ITIN number.
g. Ignore ‘Foreign (non-US) address.’ Leave blank. h. Fill in as follows “09/01/1970” for 1st September 1970. Print United Kingdom in full. Under ‘City and state or province’ put the information exactly as it appears on your passport.For a UK passport, put either a county, say Hampshire, or a town, say Carlisle. i. Using your skill and judgement, fill in (5). The boxes marked ‘Male’ or ‘Female.’
j. Probably make another cup of tea now, put some more ice and gin in the gin and tonic, or make fresh coffee. This is a tricky section. Brace yourself. k. 6a. United Kingdom, printed in capitals. 6b. Put in your UK tax number here, if you want, and if you have it. Not obligatory 6c. Best leave blank, unless you have a visa for a visit to the U.S for purposes other than tourism, in which case specify 6d. A UK passport is the only stand-alone document accepted here, so the easiest thing to do is to use the details from it. So just tick the box marked ‘passport’ and leave the others blank. Put ‘UK Govt.’ in the ‘Issued by…’ box for your passport, and include its number and expiry date.
6e. Tick ‘No/Do Not Know.’ 6f. Skip. After ‘TIN or EIN’ put ‘N/A.’ 6g. See the W7 instructions – this is for people already in the US so almost certainly not applicable to you.
Then sign, put the date, with month first, day second, year third – ie. 11/24/2013 – and enter a working mobile phone or landline where you can be reached. That is the W7 form now filled-in.
The quest for the ITIN can now go down two paths. The most important bit of paperwork you will need is a copy of your passport, certified, which will provide identification of you to the IRS. If you live in the UK, the best way to do this is to visit the US Inland Revenue office at the U.S Embassy in London. The officials there will check your documentation, and that you have filled in your forms correctly, will certify your ID documents, and mail your forms and paperwork to the US. Check on the US Embassy website for opening times, get there as early as possible, and be prepared for rigid security. See other advice articles for specific embassy details.
If you live abroad, and cannot return back to the UK for whatever reason to visit the American embassy in London, you need to get a copy of your passport certified by its ‘issuing authority.’ This is really important. This means a representative abroad of the British Foreign and Commonwealth Office. Which means the consular and visa section of any British Embassy. It does not mean a British lawyer, barrister or solicitor living and working abroad who is authorized by the British Embassy or other bodies in said country – be it Italy, Thailand, Switzerland, Paraguay – to legally validate or approve British documents issued by a government agency in the UK
The IRS won’t, unfortunately, accept this. It would be great if they did, but they don’t. It has to be done by a British Embassy. So, depending on where you live, check with the consular and visa section of your local embassy, and see if this is a service they will provide. Although most embassies will happily provide this – the British FCO abroad is very efficient and helpful – some bigger UK embassies are so busy with other consular matters that they may not be able to do it. But they can direct you to ones that can.
The next step is almost as important. To prove to the IRS that you will be earning money in the United States from which you are trying to claim exemption from tax, you need to prove this to them. So you need a letter from your publishers that states clearly that in the coming or current calendar year, you, the author, will be receiving payments set against royalties, from which you will need tax exemption. No mights, or maybes, or possibly, or conditionally – it has to be definitive. So, let’s take a clear example. You should ask your publishers to present you with a letter you can print – a scan is best, as you get an original – in which they state that you, as author X, who has written book Y, under contract / ISBN ZZZ for them, will receive advance and or royalty payments in 1/2/3 installments in the calendar years/s 2013 / 2014 etc. And that they are providing this letter so that you can use it, along with the publishers’ contract, to gain exemption from US tax on any payments resulting from it.
Next, you should print the pages from your publishers’ contract which contain your, the agent’s and the publishers agreement details, and the sums of money involved in the various advance installments. These are normally the first 2-3 pages. Then also print the final page, which is the one containing the signatures of your publishers and Andrew Lownie as your representative.
It’s also an idea to put in a photocopy of the data page of your UK passport for reference, and a photocopy of the certification, but this is optional. Include a sheet of A4 paper with the various forms, on which you list what you are sending to the Inland Revenue address, which is written in their guidelines. It’s the one in Austin, Texas. So your check list should include : Completed W7 form, UK passport certification, publishers’ contract, signed letter from publishers, a clear note of your address and mobile number and email, and a line of thanks at the bottom. Take this to the post office wherever you are, and send it recorded or registered delivery. Don’t send any original documents – the passport certification suffices. If you want to send it by DHL or other courier, there is a separate address for this.
Send it. Then wait. Some people get their ITIN after a month, some six weeks. I waited nearly ten. But it arrived. When it does, simply fill in the W-8 BEN form, and send it to the US publishers, cc-ing it to Andrew.
In Box 6 of part 1 on the form, put your ITIN here, clearly marked. In part II, in section 9 just put ‘United Kingdom.’ In section 10 put article ’12,’ to claim a ‘30%’ of withholding on ‘Book Royalties.’ And at the bottom add a line like ‘Author claiming withheld monies on book royalties.’ Then sign it, and date it – month, day, year – and put ‘Individual’ on the line which says ‘Capacity in which acting.’
With thanks to John and Celia Lee, Neil McKenna, Christopher Moran, Louisa Treger, Adrian Weale, Ian Graham and other clients of the Andrew Lownie Agency who have provided advice on his website on this seemingly-complex process. Advice articles written by some of them, from experience, can be found on the website, from 2004 to the present.