Tax question

[RobeH]

Hello all, I have a question about tax I would really appreciate some advice on. Apologies if this isn't the right place to post it.

I am a self-employed UK citizen and registered with the IRS for tax purposes. Most of my current income is from book royalties, and before October I have to submit my tax return to the UK Inland Revenue for the past financial year.

For the purposes of claiming Working Tax Credits, do I have to submit my US-based earnings to the Inland Revenue as part of my UK earnings, or not? I believe the IRS will tax me on my US income anyway, so they count as separate.

Thank you for any comments/help etc - hope that isn't too garbled!

 

[Becky Black]

Actually, you shouldn't have to pay tax to the IRS, if you're not a US citizen or resident. There's a thing called a tax treaty that prevents you from having to pay tax twice on the same earnings in two different countries.

This hinges on getting a thing called an ITIN (Individual Taxpayer Identification Number) and completing the form W8-BEN that shows you should be exempt from having any of your earnings withheld by the IRS. That form is sent to whoever is paying your royalties - a publisher, or Amazon or Smashwords if you've published yourself through them.

If you don't do this, you will be taxed by the IRS and still have to pay tax to HMRC on what's left.

If you're self-publishing through KDP you'll find that the help forums on there have loads of info on it. Generally research on it, and if you're with a publisher ask them about the W8-BEN form.

 

[Becky Black]

How it works with me:

I got my ITIN.
I sent the W8-BEN to the publisher. (And later to two more publishers and also KDP and Smashwords.)
The publishers don't withhold any of my royalties for tax they way they do for their authors in the US.
I get my royalties in dollars and they are converted into GPB through the bank or Paypal depending on how I receive them.
I fill in my tax return with those GBP amounts.

 

[RobeH]

How it works with me:

I got my ITIN.
I sent the W8-BEN to the publisher. (And later to two more publishers and also KDP and Smashwords.)
The publishers don't withhold any of my royalties for tax they way they do for their authors in the US.
I get my royalties in dollars and they are converted into GPB through the bank or Paypal depending on how I receive them.
I fill in my tax return with those GBP amounts.

Thanks both. I already have an ITIN and received my W8-BEN form. Almost all of my royalties are through self-publishing. So it looks as though I only fill in my GBP earnings for the HRMC?

 

[Old Hack]

Why don't you phone your local tax office and ask?

 

[Becky Black]

That's right. As long as your W8-BEN is in with whoever pays your royalties then you should be getting all of them with no US tax taken off. And then you declare them all to HMRC on your tax return.

On my tax return I just complete the proceeds in pounds after the conversion from dollars. That's the money I've received, that's the money I pay tax on.

 

[Becky Black]

Why don't you phone your local tax office and ask?

To say I found the local tax office unhelpful when I was trying to figure this stuff out the first time would be an understatement.

 

[RobeH]

To say I found the local tax office unhelpful when I was trying to figure this stuff out the first time would be an understatement.

Thanks! Becky! That's great, just what I needed to know