I am new and have what may sound like a stupid question, but what number am I supposed to use my tax number when setting up my account? It says that Createspace reports royalties to the IRS, which I expected, and says they can't publish my book until I provide a tax id number. Am I supposed to use a social security number or go to www.irs.gov and get an EID or something else? I want to buy my own ISBN number, and publish under my own publishing company name, and thought I would ask you if you have any advice for me.
If you follow a circuitous path through the various IRS forms, you will find that your Tax Identification Number is your SSN if you have one. If you do not have an SSN, then you follow one of the alternative routes to getting a TIN (or ITIN if you are not a US resident), provided that you are either using CS as your publisher of record, or publishing in your own right. If you set up a corporate publisher it is probably different - I haven't looked at that one.
No, nobody has to provide a tax ID to be able to use CreateSpace and you can set up your title without it (I did without initially providing a tax ID). If you don’t provide a tax ID, CreateSpace will withhold tax from your revenue at the relevant rate (28% for US resident taxpayers and 30% for non-US resident taxpayers) and remit it to the IRS before remitting your revenue to you.
If you are a US resident, then you can submit your Social Security Number (or US Taxpayer ID if it’s not the same as your SSN) and CreateSpace will not withhold.
If you are not a US resident, then you can apply to the IRS for either an Individual Taxpayer ID Number or an Employer Identification Number and submitted that to CreateSpace on IRS Form W8-BEN claiming benefit under tax treaty between the country in which you live and the US (if there is one – for me it reduces the tax withholding rate to 5%).
As my publishing company (and it is a company) is not within the US, I applied to the IRS for an EIN rather than an ITIN and submitted that to CreateSpace. I found the process for applying for an EIN much simpler than the process for an ITIN (which needs you to get a letter from CreateSpace and have identification documents notarized if you don’t want to send the originals to the IRS). For me, it involved a phone call to the IRS and faxing a form SS4 (already completed) to a number in Pennsylvania and I had the EIN within 15 minutes (rather than weeks or months I hear it can take to get an ITIN). If you are outside the US, you will need to call the IRS (they were most helpful) and you can get further details about the number to call at the IRS website here:
(That page will give you links to the forms and to a place to apply online for an EIN - as a non-US resident, I couldn't use the online application process and it gave me the phone number to call in Pennsylvania.)
It also means I have to submit a US tax return in addition to my local tax return, so depending on your circumstances you may wish to just have CreateSpace withhold the tax at the maximum rate and get some advice from a local tax adviser about whether you can report on your local tax return the income you earn as foreign income and the tax withheld by CreateSpace as foreign tax paid at the source of the foreign income.
Darn, you posted you have an SSN as I was typing my answer!
Yes, you could enter your SSN. But you you might need to pay to get some tax advice about whether you need to get an EIN, depending on how you've got your publishing business set up (money well spent to avoid messing with the IRS), and you can apply online for an EIN.
Thank you everyone!! I really do appreciate the feedback. I live in the US, have a social security number, have written a children's book, and want to buy the ISBN number, and publish it under my own publishing company. I think I will need to get an EID from the IRS for the publishing company, and then once I have that, buy the ISBN number as that publisher. Does that sound right, or am I way off base? hahaha! I haven't started a company yet, but I have a name, and bought the domain name for it because I want to have the website address on the back cover of the book when it is published.
So many of you have such great experience with all of this stuff. I really appreciate the feedback.
Yes, you do have the basic gist of what needs to be done.
But I still suggest you cough up the dosh get some tax (and probably even legal) advice before you decide how you want to set yourself up (sole trader vs. company vs. whatever other business types are available) to work out what's right for you. Some business structures have better tax advantages than others but the other business structures may be simpler to operate (and as I understand it there are different company types, as where I live) and all have different advantages and disadvantages, different tax consequences, different legal liabilities, etc. I know how hard it is to cough up the dosh now (been there, done that), but it will be cheaper to spend the money now and get it right first time is way cheaper than to pay a lawyer and a tax adviser to fix it up later
If you are a sole-proprietor you can still get a tax ID and use that to identify your business (that way you don't have to give your SSN to anyone). Getting an EIN is free on the IRS website.
But the easiest way is to just your your Social Security Number, and yes, you can run your publishing company just using your Social, many people do. You are only REQUIRED to get an EIN (also called an EMPLOYER TAX ID) when you hire employees or you form a different entity type, such as a corporation or a partnership.
If it's just you, then you are free to run your "publishing company" using your own Social Security Number indefinitely. Then, when tax time rolls around, you just report the income on Schedule C, as a self-employed writer. It's pretty easy if it's just you running the show. I hope this all makes sense.
(By the way I'm trained as a tax accountant, so feel free to post a follow-up if you have any more questions).
Once you've published your book, do you need to pay quarterly taxes and then at the end of the year just turn in a 1099 and schedule C? Just wondering the exact paperwork and whatnot that goes into self publishing.
It's difficult to explain this simply, but if you start earning money, then yes, you will be required to pay taxes on the income. Many people pay quarterly estimated taxes, but estimates are not required unless you owe at least $1,000 in tax. Even if you do not pay estimates, nothing "bad" will happen. The worst is that you may have to pay a penalty when you file your tax return, and that will also depend on whether you have any actual income from publishing. Rememeber that tax is based on your net income, so you will have expenses as well to offset income (like the cost of your proofs, etc).
Like I mentioned, if you are completely lost, get "Taxes for Dummies" from the libabry. It's very easy to read. Or, you can pay for the services of a tax accountant, which will be about 100 for a consultation.