Tuesday, February 7, 2012

The IRS and everything you didn't know you needed to know

Taxes. Ugh. Just the thought of having to submit a tax return is enough to make most of us break out in hives. But sadly, it's not an issue we can ignore, so I'm going to try to make this easy for you.

New legislation in the US has made it impossible for any law-abiding publisher in the States to pay anyone who isn't registered with the IRS. Since the vast majority of publishers (including Amazon) are based in the States this means you have two choices if you sell a book or choose to self publish.

Option A. You can register with the IRS.
Option B. You can donate any income from your books to a US-based charity.

Since I plan on making a career - and a living - as a writer, I know which option I'm going to choose. [Sorry Greenpeace].

In order to receive payments from a US-based publisher you need to get an ITIN number (Individual Taxpayer Identification Number). This is a relatively simple process: 
  1. Your publisher will give you a letter confirming you will be receiving payments from them. 
  2. Download the W7 form from the IRS website
  3. Complete the form, noting the following: 
  4. Note 1: South Africans select option 'a' at the top of the list - you are a non-US resident claiming a tax treaty benefit. 
  5. Note 2: You also need to select option 'h - Other' and write 'Exception 1(d) - Royalty Income' in the available space. 
  6. Note 3: Don't forget to include South Africa as your Treaty Country. The Treaty Article Number had me stymied, but the article pertaining to royalty income in the Convention of 1997 between SA and the USA appears to be Article 12.
  7. Make a copy of your ID or passport, or some other legal proof of identity. 
  8. Get your ID copy notarised. Ideally, this should be by a public notary rather than at your local branch of the SAPS.
  9. Get an Apostille. This is the tricky bit of the process (the bit I didn't do first time around!) because you can't just get any regular South African notary to do this for you. An Apostille is a document signed by the Registrar of the High Court verifying the South African notary public’s signature. Some attorneys are able to assist, but the only quote I've received so far is a tad pricey (at over R6,000!) but you can apply for an Apostille free of charge through the Department of International Relations. Their offices are in Rietondale, Pretoria, or alternately you can send your documents via snail mail (details on their website).
  10. Snail mail your completed W-7 Form, publisher's letter, ID and Apostille to: Internal Revenue Service, Austin Service Center, ITIN Operation, P.O. Box 149342, Austin, TX 78714-9342.
  11. Wait a couple of months for the IRS to process your application and snail mail you back with an ITIN. While you're waiting, your publisher can defer any payments to you, meaning they hold onto them until they can legally pay it over. 
  12. Complete the W8-Ben form and send it to your publisher. Done. 

The good news is by doing this your publisher will deduct only 10% tax from your earnings, rather than the 30% withholding tax that is usually deducted.
And since your publisher will provide you with proof that you're already paying taxes on this income in the US, you should also be safe from having to give SARS yet another slice of the pie.

South African author Judy Croome (who is conveniently married to a tax expert) has also done a very helpful blog post with links on this issue.

I know this is a schlep, but I highly recommend you do it as soon as you sign your first contract with your publisher. After all, rather do it now at the start of your career than later when you're hitting the bestseller lists and wondering why the hell you signed away all your earnings to Greenpeace.

Update: Please note that these instructions apply only to residents of South Africa. Residents of other countries may have different ITIN application requirements or processes.

And another update - March 2012: I found a very helpful attorney in Fourways, Johannesburg, who arranged the apostille for only R285. It took about 3 working days. If you'd like her contact details, email me on romy@romancewriters.co.za.

Update July 2012: Whatever you do, do not send your application via the SA Post Office. They managed to lose my apostilled documents, so I'm back at square one and need to re-apply!

Update 2013: The US government no longer accepts apostilled copies from the South African high court (this is the real effect of widespread corruption!), so now you will need to visit your nearest US embassy or consulate in person to have your passport stamped and notarised. The cost is approximately R500.


  1. Surely you could also get the SA passport authority to notarise or verify a copy of your passport? That might be easier and quicker? I mailed my stuff to IRS weeks and weeks ago so will report back on progress.

    1. Good point, Gina. You might if you're a South African living abroad, but the current US/SA policy is that no South African notary is acceptable, hence the Apostille. So a pain in the a** for those of us living in SA.

    2. PS: And yes, please keep us posted on your progress.

  2. Hi girls - I'm in Australia, which wouldn't be a problem if I owned a passport. The U.S. Embassy and Consulates here refuse to notarise any amount of I.D., and believe me I sent them EVERYTHING - because none of it was a passport. The cost of procuring a passport would be okay - $250 in Oz - if I ever intended to use it, but at 71 I'm not likely to. The last resort is to directly phone the IRS.

    Solicitor notaries here are incredibly expensive too. Ever had the feeling of being caught between a rock and a hard place? I'm about to email Rhonda with my latest bad news.

    Good luck to all of you, happy writing and many sales.

  3. Well written article, Romy, there's some useful additional info included!

    I've set up a link to this blog post at the bottom of my blog post No Escaping Tax Payments (May 2011) and I'll tweet this article too.

    And I must be more brainwashed about tax after 20 years with hubby than I realised...my tax article was all my own idea (a middle of the night brainstorm!) and all my own research (one doesn't get free advice from lawyers, I'm afraid, not even when you're married to one!!!) :)

  4. Thanks a lot for the information. I'm starting to get the idea that writing the book was the easy part ... :( Our post office is abysmal, they manage to lose 1 in 5 packages addressed to me.

  5. Thanks for the link, Judy!

    Bruno - I've learned the hard way never send anything via the post office before Christmas as it will be ransacked. Luckily my last package only had German books inside, so the branch manager found them. You just don't want to know what state the ripped-open packaging was in!

  6. A heads up: I had an interesting chat with South Africa YA author Joanne McGregor at the recent Sanlam 2012 Youth Literature Award ceremony at Emoyeni. Joanne had previously contacted me about getting a tax number for a non-US resident author and kindly shared with me a very detailed blog post on a short cut to getting that dratted US tax number.

    Here is the excellent and detailed blog post by Irish author CATHERINE RYAN HOWARD on an easier way to get a US tax number for Non US resident authors

    The many comments on Catherine's blog are worth reading too.

    Joanne followed these steps and said it took her less than an hour to get her US tax number via Skype.

  7. Thank you so much. This article was very helpful. My anxiety has reduced a little.