Amazon KDP 30% Tax Withholding and Double Taxation.

Summary

The video script discusses the 30% tax that Amazon KDP often deducts from authors' earnings, particularly those living outside of the United States. The speaker, who has some accountancy qualifications, advises viewers to consult with an accountant due to the complexity of individual tax situations. They explain the concept of double taxation and how it can affect authors' earnings after Amazon's tax deduction. The video outlines steps to update tax information on Amazon KDP and emphasizes the importance of declaring all earnings, even those that have been taxed. It also touches on the possibility of claiming some taxes back, but highlights the difficulty of dealing with an overseas entity like Amazon. The speaker suggests that authors may be able to claim certain business expenses to offset taxes and recommends against letting Amazon handle tax deductions to avoid complications. The summary underscores the importance of professional accounting advice in navigating the intricacies of taxation for self-published authors.

Takeaways

• 📚 Subscribe to the channel for more informative content.
• 🔔 Hit the notification bell to stay updated with new videos.
• 💰 Amazon KDP takes a 30% tax on earnings, especially for those living outside the United States.
• 🤔 The concept of double taxation can affect how much you owe in taxes, depending on your country's tax laws.
• 🙅‍♂️ It's advised to consult an accountant for personalized tax advice, as individual circumstances vary.
• 📈 You are not selling books, but earning royalties from your creative work, which is a different financial perspective.
• 📝 When speaking to an accountant, clarify that you are living on royalties, not sales.
• 🔄 Amazon KDP's 30% tax can be modified or avoided, but it requires updating your tax information.
• 🇺🇸 If you have a non-US TIN (Taxpayer Identification Number), you may be able to reduce the tax taken by Amazon KDP.
• 💼 Some countries may not provide relief from the 30% tax, but you might only be taxed on a portion of your earnings.
• 🔋 If you've overpaid in taxes, you might be able to claim some or all of it back, but this can be complex and is best handled by an accountant.
• 🚫 Even if you've been taxed on your earnings, you must still declare them to avoid legal issues.
• 🏦 It's important to understand that tax laws and regulations can differ significantly from one country to another.
• 🧮 Deductible expenses related to your work, like a home office or equipment, might reduce your taxable income.
• ✅ It's generally better to handle taxes yourself rather than letting Amazon deal with it, to avoid potential complications.

Q & A

What is the 30% tax that Amazon KDP takes from authors living outside of the United States?

The 30% tax refers to the withholding tax that Amazon KDP (Kindle Direct Publishing) deducts from royalties for authors who are not U.S. citizens or residents. This is a standard tax practice for payments made to foreign entities or individuals.

What is double taxation and how does it affect authors receiving royalties from Amazon KDP?

Double taxation occurs when an individual or entity is taxed on the same income in more than one jurisdiction. For authors, this could mean being taxed by their home country on their worldwide income, including royalties from Amazon KDP, even if those royalties have already been subject to withholding tax in the U.S.

Why is it recommended to consult an accountant when dealing with taxes on Amazon KDP royalties?

An accountant can provide personalized advice based on an individual's specific circumstances, including their tax bracket, business structure, and potential deductions. They can also help navigate the complexities of international tax laws and double taxation agreements.

How does one's status as a seller of goods versus receiving royalties affect their tax situation?

Receiving royalties is different from selling goods because royalties are payments for the use of something one has already created. This distinction can affect how income is taxed and what deductions one might be eligible for.

What is an EIN and when would an author need to provide it to Amazon KDP?

An EIN, or Employer Identification Number, is a tax identification number used in the U.S. Authors who are not U.S. citizens may need to provide a similar identification number from their home country, such as a National Insurance number in the UK, when setting up their tax information with Amazon KDP.

How can authors update their tax information with Amazon KDP?

Authors can update their tax information by going to their account settings on KDP, clicking on 'View Tax Information', and then following the prompts to complete an interview that will guide them through the process of providing or updating their tax details.

What is the impact of double taxation on an author's income after Amazon KDP has withheld the 30% tax?

After the 30% tax withholding, the remaining income may still be taxable in the author's home country, depending on their tax laws and any tax treaties between their country and the U.S. This could result in the same income being taxed twice.

Can authors claim back the 30% tax withheld by Amazon KDP?

It may be possible to claim back some or all of the 30% tax, but this can be a complex process involving international tax laws and often requires the assistance of an accountant. The ability to claim back the tax also depends on the tax laws in the author's country of residence.

What is the advice for authors regarding claiming deductions on business expenses related to their writing?

Authors should consult with an accountant to determine what expenses can be claimed as deductions. This may include costs associated with creating their books, such as equipment and home office expenses, but the specifics will depend on individual circumstances and local tax laws.

Why might an author choose to handle their own taxes rather than allowing Amazon KDP to do so?

Handling taxes independently allows an author to have more control over their financial situation and potentially claim deductions that they might not be able to if taxes were handled by Amazon KDP. It also avoids the complexity of dealing with an overseas entity for tax purposes.

What is the importance of declaring all earnings, even those that have been taxed by Amazon KDP?

All income, including royalties that have been taxed by Amazon KDP, must be declared to the tax authorities in the author's country of residence. This is important for compliance with local tax laws and to ensure that the author is not inadvertently underreporting their income.