Tuesday, April 05, 2011

Cat's Adventures in Taxland (aka An UK author gets her ITIN... at the first attempt!)

I’ve been stressing out over applying for a ITIN (Individual Taxpayer Identification Number) for… months. And then some. But, like most things, the reality of the process turned out to be far simpler and easier than I imagined. I know it's an issue for many people, so I thought it might be helpful to share my experience.

If you’re a Brit (or any other non-US citizen) writing for an US publisher, chances are you’re going to need one of these sooner or later. Your publisher might have asked you for form W-8BEN already, which you can't complete without an ITIN. Basically, it means that the income you declare as a self employed writer in the UK isn’t already taxed by the time it gets to you, reducing the risk of being taxed twice on the same income. The US has tax treaty agreements with many countries, at various percentages. I can only speak for applications from the UK; if you’re elsewhere then parts of this won’t apply to you, but it might help as a starting point.

Now, the Cat-covers-her-ass disclaimer: I’m not a tax advisor, nor do I play one on TV. I am not a lawyer. I’m just sharing this as someone who managed to get her ITIN at the very first attempt, with the absolute minimum of cost, fuss, effort and angst. I make no guarantees that what worked for me will work for you. If it helps, great, but please don’t take my word for any of it. If in doubt always get professional advice. This post is for entertainment purposes only. ;)

Okay, before we even get to the form itself, let me address the issue of ID. The IRS is very strict about what counts as acceptable ID to accompany the application. Pretty much the only acceptable ID for an UK citizen is their passport. You can either send the original, or a notarized copy. From what I could figure out, to get a notarized passport copy they’d accept you’d need to get a photocopy signed by an approved notary – usually at your local solicitor’s office; mine wanted £100 for the privilege – and then send the copy to the Foreign Office (the body that issued your passport in the first place), where it gets legalized as a certified apostille. This costs an additional £30 or so per document. I was paranoid I’d mess up at least once, so was budgeting for two copies of everything. Doing it this way meant little change from £300. This was still cheaper than the prices quoted by Acceptance Agents, who pretty much require you to do most of this legwork first anyway. That route would’ve been upwards of £600, all told.

Yeah. Wasn’t gonna happen. So I was stuck with the decidedly unappealing prospect of sending my passport to Texas for 8-10 weeks. Cheaper, yes, but a little too risky for me.

Fortunately, while trawling the net for advice on this issue I found out you can just send the whole application – including your original passport – to the IRS department of the US Embassy in London. You can also physically take the application in if you live close enough. I’m over six hours away, so that wasn’t an option. This discovery alone pretty much changed my entire perception of the application process. Sending stuff to London felt a lot less stressful, and, should there be a mistake, resending it all wouldn’t be as much of a hassle and would only involve another £5 or so postage.

The W-7 form itself, once you figure out the treaty codes, is pretty simple. Here's the IRS's page with information about the tax treaties, and here's their list of all the individual treaties by country. The toughest part of it is figuring out what you need to leave blank and where you need a N/A. I’d heard horror stories about applications being refused just for one N/A out of place. I’d put it down to Internet myths, but hey… it’s the IRS. With a silent N for Nitpicky. Again, combining a whole slew of sources I finally had a completed form I was happy with. Here’s an image of the form, filled out exactly the way I filled in mine, minus the personal details, if you want to use it for reference. Like I said, I don’t know whether all the N/As were entirely necessary but all I can say is that I have my ITIN so something about it must’ve been right!

I will mention one thing, though. I can’t stress enough that this is ONLY my experience, and from what I’ve read certainly not the norm, but the publisher letter I sent in with the application was NOT an original, it was a PDF print out. It DID contain the publisher’s letterhead and digitized signature (and was personalized for me) but seeing as some people recommend only sending documents your publisher send to you via snail mail with honest-to-goodness real ink signatures on 'em, I just wanted to mention that I didn’t. I’m sure it’s always safer to send originals, but I thought it was important to note.

So, with the form, the letter, your passport, and a covering letter listing all the enclosed documents (probably not necessary but hey, it seemed polite), send them all via Recorded/Special Delivery to:

Internal Revenue Service
American Embassy
24 Grosvenor Square
London W1A 1AE
United Kingdom

I'm pretty sure they’ll check it over, and should there be any errors they'll send it back to you for correction before it gets forwarded on to Texas. Mine was fine, so all I received back was my passport, and an information sheet listing who I should contact if I needed to follow up. The other bonus is that they don’t keep your passport very long. I sent my package off on a Friday, and I had my passport back on Thursday. They also return it Recorded too.

The estimated wait time varies between six and ten weeks depending on where you look, but mine took seven weeks. Now to fill out the W-8BEN, which – thankfully! – is much simpler than the W7. All the info you need for the W-8BEN (treaty codes, rates, etc.) is stuff you’ve already figured out for the W-7.

And that’s it! Hope that proves helpful to anyone else muddling through the process.


Monica said...

Hi, this is amazing - exactly the information I was looking for.
I was just wondering what your publisher had to write in the letter?
Many, many thanks - you have saved me hours and hours or trawling of work trying to figure this all out.

Cat Kane said...

Hi Monica -- glad I could help! The whole process had been giving me a headache for quite some time! Of course, I'd advise you to ask someone who's actually qualified to give advice if you have any concerns, but if I've saved one person the trouble I went through then it's worth it. All the advice I could find at the time made the whole thing sound horribly complicated.

The letter from the publisher just said that under US tax law, I was required to have an ITIN number and complete a W-8BEN form (i.e. it's addressed to me saying "hey, you need this stuff!" -- basically so the IRS see that your publisher is asking this of you and you have a reason to be asking them for an ITIN).

Hope that helps!