Several months ago I discovered that Smashwords began withholding 30% of my earnings to give to America’s Uncle Sam. If I didn’t act, I’d continue to lose this money for the life of my writing career.
To claim this 30% in the future, I’d have to jump through hoops at 1,000 feet in the air and ride a wild boar through the desert…okay, nothing that drastic, but everything I read and everyone I talked to led me to believe that getting all the paperwork in order would be a time-consuming nightmare.
They couldn’t have been more wrong.
But before I realised the ease of reclaiming that money, I had reluctantly accepted the fact I would lose $300 for every $1,000 I’d earn in royalties. It was hard to swallow. Just think about this for a minute:
You post a book to Smashwords for $2.99. It sells through them to Kindle who takes 30% for selling it plus $0.09 for delivering it to the customer. You’re now left with $2.00. Smashwords takes about $0.14 of this for a service charge (their hand in selling it). You’re now left with $1.86. From this, Uncle Sam withholds 30%, leaving you with $1.30. Withhold means claiming that money as income tax.
Let me paint a bigger picture for you. For every 1,000 books you sell at $2.99, your profit drops from a potential $2999.00 to $1300.00 after all those hands grab what they want. If you didn’t have to pay Uncle Sam, you would have earned $1,860.00. It takes about 30 minutes to get an EIN and complete the proper form to reclaim that money. And you only have to do this once. In my books, $560 for a half hour’s work is an outstanding pay cheque.
The imagined nightmare has discouraged many writers from dealing with the IRS, but it doesn’t have to be like this. You can start claiming that 30% by following the simple steps below. It will take approximately 25 minutes of your time, one long-distant phone call, one completed form and a US stamp. Oh, and one envelope.