This article will only be useful to self-employed workers resident in the UK (called “non-resident aliens” by the US tax authorities) who may find themselves dealing with US business concerns and/or earning money from affairs in the USA.
Perhaps you are a writer living and working in the Scotland or England, and you have just had the spectacular news that your book is to be published in America, or that your sales base is set to expand to the States. Congratulations.
It might be an idea to think about your tax situation. All businesses in the United States are required to deduct 30% for tax automatically, from every cent they send to overseas authors, unless that author has previously obtained an ITIN, an Individual Tax Identification Number.
Through a process of individual registration with the IRS, an ITIN allocated to any individual contractor then allows any American business with overseas contractors, suppliers or contacts, to send a UK resident the whole amount of their fees and gains gross, without keeping back 30% tax. The author in possession of an ITIN certificate then accounts and pays tax as they would for their other (domestic) income within their country of domicile. So obtaining an ITIN is a very good idea.
Sorry. This sounds like a tax seminar, which was not the idea.
To obtain an ITIN, first go to the IRS website and print off the most up-to-date application form, which is called a W-7 form, and complete it. Before sending it anywhere, remember to sign and date it. With the completed W-7 form, also send
- certified copy ID and
- a letter from the US business concerned confirming the basics of the deal.
Based in Edinburgh, I am fortunate. I can take my passport to the American Consulate here, based near Calton Hill. They provide formal copies of passport ID, which colour copy includes an embossed seal of the Consulate and a signature for a cost of $50. On returning home armed with the certified copy, I immediately return my passport to its safe place at home and resist all suggestions, however tempting, to send it to Austin, Texas.
To obtain an ITIN I will finally send to the Internal Revenue Service, Austin Service Center, ITIN Operation, P.O. Box 149342, Austin, TX 78714-9342
- the original certified copy of my passport;
- a completed and signed W-7; and
- an original letter from my publisher.
I will take several good copies of all supporting documents so that, if the post got lost, I would not have to go back to the US Consulate again or ask my publisher for another letter. (What? You forgot to take a copy?)(How embarrassing).
For these purposes, any US Consulate is treated as equivalent to a department of the US government, and is not merely an “acceptance agency”. Therefore, no further proof is required, provided Austin see the original certified copy passport.
There used to be a free, dedicated phone line you could call, direct to Austin Texas, but I would not recommend it. Nowadays, it costs, the queue is long and the answers feel unsure. These days, direct postage to the US appears to be the only option.
It is worth mentioning that while an ITIN covers all earnings in the US for a period of five years, each separate transaction with a different company (for example, receiving an advance of royalties with a publisher, negotiating audio fees or appearance fees with other businesses) requires you to complete a separate W-8BEN form. We keep hold of our ITIN papers, but we have to send off a new W-8BEN form for each new business transaction. Often, the US business will ask to see an original, inked copy of the form, which can be downloaded from the IRS website, but which may take two weeks to arrive in the US. If your fees are slow in coming, check whether accounts payable is still waiting for an original W-8BEN form, and if so, send it asap.
Every ITIN is valid for five years. And if I was a US resident citizen paying US tax, I would have to renew it when it expired. BUT since I am not resident in the USA and since I don’t pay any tax to the IRS, my ITIN does not require to be renewed. Basically, until the IRS ask me to renew, I can continue to rely on the exemption provided by my existing ITIN, since it is only used by my publisher to allow them to send me my royalties without deducting US tax.
So, if you are a non-resident alien with an ITIN, you do not require to have it renewed, until you are asked to. (Which would only be if and when you ever start sending in a US tax return.)
I hope that is helpful. I apologise that this sounds a bit dry and formal. I am not a lawyer any more, and the information and procedures noted here are prone to change, so please check them. If anyone would like further clarification, I will do my best to help.
You can contact me here or at firstname.lastname@example.org