Update on Canada Tax Information with the United States

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Something amazing happened during my seven-month hiatus away from writing: the tax worries and hassles that plagued writing entrepreneurs in Canada had eased. In fact, it’s so darn easy now that no one—absolutely no one—has an excuse for not completing the tax form to prevent the IRS from claiming 30% of your royalties from your books.

More than a month ago, CreateSpace sent a message to update my tax information. I meant to take care of it, but like many things since March, it got lost in the chaos of life. The deadline came and went, but fortunately CreateSpace—who really wants my business—extended the deadline.

If I didn’t update my tax information, I would no longer be able to sell through CreateSpace. They certainly didn’t want that to happen, so a grace period of thirty days was awarded. This time I took advantage of the notice and stayed up late one night to see what the fuss was all about.

The questions were straight forward and easy to answer: Was I a US citizen? Did I have a business in the US? Etc.

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EINs are Now Available

New FlashI’ve received news that the lines are now open for Canadians to call and get their Employer Identification Number (EIN). When the government in the United States shut down a few weeks ago (as reported in this post), it became impossible for anyone to get through on the telephone lines. For many, this was the only route available, so getting an EIN came to a sudden stop.

If you’ve been trying to get an EIN and have given up because of frustration, give it another try. From the report I received it was business as usual.

If you’re looking for information on EINs or interested in learning how to get one, visit Canadians, Stop Paying 30% to the IRS.

Government Shut Down Causes EIN Woes

New FlashGetting your Employer Identification Number (EIN) may be a little difficult at the moment. Two individuals who have tried and failed to get through using the telephone number have contacted me to share this information. Lines are tied up; they can’t get through; they are told by a recording to try again.

What is an EIN you ask? It’s an identification number that gives Canadians the ability to claim 100% of their royalties when a company in the United States distributes an eBook or printed book by a Canadian company. For example, if you are a self-published author and you sell your books through Smashwords, Kindle or CreateSpace, you need an EIN or you lose 30% of your earnings to the American tax man.

You can read more about this in my post Canadians, Stop Paying 30% to the IRS.

The phone number in my post is correct. The problem is with the government shut down that happened earlier this week. People knew this was coming, so the lines got tied up before the actual shut down occurred. Now that all non-essential employees to the US government are temporarily laid off, there’s little chance this grid lock is going to come undone any time soon.

It may be best to wait until the US government sorts out this mess before attempted to get an EIN.

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My Most Popular Post

popular5x5One wonderful feature of WordPress is the ability to see which blog post is the most popular. In other words, gets the most views. After two and a half years of blogging, there’s one post that stands mountains above the rest. In fact every day I get several visitors searching out this particular post.

The most popular post of all time is no surprise to me. People hate to part with money and this post is all about money; or should I say saving it.

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Canadians, Stop Paying 30% to the IRS

MONEY drainLINKS UPDATED: November 7, 2014

GREAT NEWS: The rules have changed. You no longer need an EIN or an ITIN unless you have extenuating circumstances. Read the update here: Update on Canada Tax Information with the United States. I will leave this original post up for those who still need to apply for an EIN.

* * * ORIGINAL POST * * *

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.

Let's Get Digital: How To Self-Publish, And Why You Should (Third Edition) (Let's Get Publishing Book 1) by [Gaughran, David]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.

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