Adsense
As anyone who has an adsense account knows, Google doesn't usually release your payments until you've reached $100 + in adsense revenue.
Imagine, then, my surprise when I received a notice saying that my earnings (all $40 worth) were being withheld until I had provided Google with certain tax information.
Now, up to this point I had been averaging about $1-3 a month in adsense revenue so I hadn't really considered how I planned to claim my earnings. Here we enter the Form W-8BEN rabbit hole.
American Tax Law
Under American tax law, it is a company's responsibility to withhold income taxes from anyone that is working for them. This is usually a flat 30% on whatever those earnings are. This includes any non-American independent contractors that might be working for them, even if they aren't residing in the US.
The danger with this, is that those individuals are at risk of being taxed twice. First by the US, and then by their country of origin. Because of this, the US has 'tax treaties' with a number of countries, including Canada.
Tax Treaties
Tax treaties are essentially agreements that say we agree not to tax this person twice. They agree to let the country of origin (in this case Canada) claim the taxes, so long as that individual has submitted paperwork to the IRS proving that they are a citizen of that country. The company that is paying you will usually request this information.
Wondering if your country has a tax treaty with the US? You can see the full list by clicking here.
Form W-7
In order to keep track of all of this, the US provides non-residents who do not have a Social Security Insurance number and are not entitled to one, with an Individual Taxpayer Identification Number (ITIN).
Independent contractors who are not American will need to fill this out in order to take advantage of the tax treaty. For access to the form and form instructions, click here.
One thing you will notice, is that the form requires certified copies of government issued identification. This can include passports, some other form of national photo i.d., or a combination of birth certificate or driver's license to establish both foreign status or identity.
These can usually be purchased for a fee by the issuing organization (in this case, Service Canada can provide a certified copy of your passport or birth certificate.)
Form W-8BEN
Once you have received your ITIN, you can now fill out the W-8BEN form. Please note that from what I've read, the ITIN will need to be used at least once in a three-year period to avoid expiring.
My guess is this whole process can take anywhere from weeks to months, so if you're planning on claiming adsense revenue you better get a move on!
And badabing, badaboom, you have your adsense revenue!
DISCLAIMER: I am but a lowly blogger, please do not take tax advice from me. If you have any questions or doubts, contact your national tax agency or the IRS directly.
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