If you're a U.S citizen with a foreign publisher how do taxes work?
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US citizens who are living in the US pay tax to the US on money earned from non-US employers. If you're a US citizen living in another country and paying taxes there, you only pay tax to the US on your income over $100,000 or so (don't remember the exact figure, but it's up around there).
This is one of the things one's agent handles for you--they should be receiving international advances and royalties on your behalf and issuing you a 1099 for them.
This is one of the things one's agent handles for you--they should be receiving international advances and royalties on your behalf and issuing you a 1099 for them.
This might not be what you're looking for, but it's my experience. Check with an accountant or tax advisor, and if I'm wrong PLEASE PM ME!
The fact that it's a foreign company doesn't matter; you would handle it as any other self employment where there is no W-2 or 1099 presented. It's based on where you live; the money comes to you, therefore you're the one getting taxed.
I conduct editing and proofreading for a Canadian service that pays me in US$ over PayPal. In addition to my 1040, I fill out the 1040-SE (self employment tax and Social Security tax) and the Schedule C-EZ (net profit from business). I have to keep up with my income myself since the company doesn't withhold or report to the IRS. If you report income based on when you earned it, you report on an "accrual" basis, and if you report income based on when you were paid, you report on a "cash" basis. For example, I get paid the first week of January for everything I did in December. I select "cash" and report the money I earned in Dec 2008 as 2009 income, as it hit my bank account in January. I then don't report the money earned in Dec 2009 because I didn't get it until Jan 2010. The opposite would happen if you report on an "accrual" basis. If you select one the first year, you must do it the same way every year.
I conduct my own witholdings. Each month, I leave about 1/3 to 1/2 of my earnings with PayPal instead of transferring to my checking account. It earns piddly interest and if you can get a better deal then take advantage of it. Therefore, if I end up having to pay in taxes I can use that money in PayPal to pay, or if I'm owed a refund those "witholdings" are 100% mine.
The fact that it's a foreign company doesn't matter; you would handle it as any other self employment where there is no W-2 or 1099 presented. It's based on where you live; the money comes to you, therefore you're the one getting taxed.
I conduct editing and proofreading for a Canadian service that pays me in US$ over PayPal. In addition to my 1040, I fill out the 1040-SE (self employment tax and Social Security tax) and the Schedule C-EZ (net profit from business). I have to keep up with my income myself since the company doesn't withhold or report to the IRS. If you report income based on when you earned it, you report on an "accrual" basis, and if you report income based on when you were paid, you report on a "cash" basis. For example, I get paid the first week of January for everything I did in December. I select "cash" and report the money I earned in Dec 2008 as 2009 income, as it hit my bank account in January. I then don't report the money earned in Dec 2009 because I didn't get it until Jan 2010. The opposite would happen if you report on an "accrual" basis. If you select one the first year, you must do it the same way every year.
I conduct my own witholdings. Each month, I leave about 1/3 to 1/2 of my earnings with PayPal instead of transferring to my checking account. It earns piddly interest and if you can get a better deal then take advantage of it. Therefore, if I end up having to pay in taxes I can use that money in PayPal to pay, or if I'm owed a refund those "witholdings" are 100% mine.
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You have to also check with a professional who has knowledge of tax laws in the country your income originated from. I own several apartments in Greece which I rent out, but I live in the US. I report the income here and get taxed on it, but I also have to file in Greece for a "reduced tax/foreign residency" exemption because they have specific laws governing this issue. The bad news is I still have to pay taxes over there, but the good news is that it amounts to practically peanuts. The only headache is that I have to show proof of my US residency to the Greek government which is very fickle about such matters because I've yet to join their army (due to health reasons they make me prove each time as though I might be suddenly cured of Diabetes by a miracle and forget to tell them).
Anyway, this is not foreign publishing income, but income is income. Different countries have different agreements with the US so each one can be it's own situation. I'm sure an agent (as previously mentioned) or a tax professional would make this much easier to deal with.
Anyway, this is not foreign publishing income, but income is income. Different countries have different agreements with the US so each one can be it's own situation. I'm sure an agent (as previously mentioned) or a tax professional would make this much easier to deal with.
Nate - If you are writing in the US, live in the US and producing the work that creates the income in the US, then you file it all as your income on Schedule C. For your state and local, include it wherever your state and local dictate self-employment income should be recorded (they all differ).
PGK's situation is different because the property producing the income is located in another country. That sets forth a whole different set of rules. What you are doing is no different that filing income on an ebay store that may sell to other countries. You've essentially retailed your product. The buyer is inconsequential.
BTW - I am a degreed accountant with over 20 years of tax prep. If you're not sure how to complete all the forms, then I suggest you talk to a tax professional the first year, at least to get an idea on all the allowed deductions. If you already have a good idea what to deduct, then something as simple as TurboTax will walk you through all the steps of completing your return.
PGK's situation is different because the property producing the income is located in another country. That sets forth a whole different set of rules. What you are doing is no different that filing income on an ebay store that may sell to other countries. You've essentially retailed your product. The buyer is inconsequential.
BTW - I am a degreed accountant with over 20 years of tax prep. If you're not sure how to complete all the forms, then I suggest you talk to a tax professional the first year, at least to get an idea on all the allowed deductions. If you already have a good idea what to deduct, then something as simple as TurboTax will walk you through all the steps of completing your return.
Thanks for the great info. The initial overseas Pub is in U.K. Of course, I'm hoping the novels will go to other countries.
I'm wondering if I'll owe income to these other countries?
Things may get crazy, but I want to eventually move to New Zealand. I guess if I have a residence there I'll have to pay their taxes.
Eventually I'll have to get an accountant.
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Nate - The income only becomes an issue if the property producing it (in this case, you) is located in another country. If you move to New Zealand, please talk to an accountant experienced with ex-patriot tax law. Ex-patriot tax law applies to American citizens living abroad and it's a whole separate set of tax rules. Make sure you talk to someone who does that as their main job as it changes all the time and you don't want bad information.
I have sold foreign rights to other countries, independent of publisher distribution, and I file the advances/royalties on my Schedule C along with everything else.
Congrats on your foreign sales and good luck with the move, if you decide to go that route!
I have sold foreign rights to other countries, independent of publisher distribution, and I file the advances/royalties on my Schedule C along with everything else.
Congrats on your foreign sales and good luck with the move, if you decide to go that route!
If the UK company bought your book through a subsidiary in the US, they may pay the income in the US, which is simpler for you.
If the company pays you in England, and you are a US citizen living in the US, you are responsible for UK taxes on the writing income.
You also pay US taxes on your writing income, starting with the first dollar.
But . . . you get to deduct the Foreign Taxes paid as a Foreign Tax Credit against the taxes you pay in the US. See IRS Publication 514. Here.
The income will be listed on your Federal Income Tax, so you'll pay the usual state and local taxes on it.
If the company pays you in England, and you are a US citizen living in the US, you are responsible for UK taxes on the writing income.
You also pay US taxes on your writing income, starting with the first dollar.
But . . . you get to deduct the Foreign Taxes paid as a Foreign Tax Credit against the taxes you pay in the US. See IRS Publication 514. Here.
The income will be listed on your Federal Income Tax, so you'll pay the usual state and local taxes on it.
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job - I know there are some countries that still require their pint of blood, but in those cases, tax paperwork is usually provided to the author, no? That has been mine and my friend's experience. The tax was withheld from distributions and essentially a non-issue beyond filling out some forms.
Thoughts about taxes takes the wind out of the sails. But it's something that has to be face, and I appreciate your advice.
Nate
I know nothing about UK tax law on royalties earned by writing. Easiest way to find out is probably to call the UK company accountants and ask.
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Where profits are declared and taxes paid by international companies is one of those Really Exciting Bits of tax law.
Speaking specifically UK, I've seen contracts for specialist work contracted in many different ways.
Where are royalties paid in your specific contract? I don't know. The publishing company however will most probably know, and know what taxes are withheld.
This will probably prove to be trivial. This is UK. Piece o cake.
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