If you’ve self-published some work and uploaded it to distributors like Amazon (and Createspace) or Smashwords, you may recently have received an email from them advising you that your 1042-S form is available to download. But what is a Form 1042-S?
The Joy of Tax
Form 1042-S is, effectively, a statement of income you’ve earned in the USA. (Amazon, Createspace and Smashwords are USA-based companies.)
Most countries around the world tax people who earn an income, and the USA is no different. However, several countries around the world have tax treaties between themselves so that people don’t pay tax on the same money twice. (You’d be a bit peeved off if Amazon or Smashwords deducted tax on the income you earned, then passed the balance across to your UK-based bank account, only for HMRC to say that you need to pay UK tax on the balance that you’d received too.)
The Form 1042-S is a statement of the income you’ve earned via these American-based companies, with details of whether any tax that has already been withheld, and how much.
Completed a W8-BEN?
Unless you tell them otherwise, USA-based companies may withhold some of your income before forwarding it on to you, if they don’t know that you live in a country that has a tax treaty with the USA. Completing a form W8-BEN gives them the authority to pass all of your income across to you, without withholding any of it.
Take A Tax Interview
The best way to do this is to take a tax interview. DON”T PANIC! This is a simple. Amazon, for example, ask you a series of questions online, which effectively completes the W8-BEN form. (Further information can be found here.)
For both Smashwords, and Amazon/Createspace you need to head to your Account settings to check whether you need to complete a W8-BEN form. This is also where you can download your 1042-S forms.
Once you’ve completed a W8-BEN form, you’ll need to go through the ‘interview’ approximately every three years. Understandably, these companies need to check that your circumstances have not changed, and the way they do this is to ask you to complete the necessary forms again. If you need an incentive, just bear in mind that if you fail to do this they may start withholding tax again, until you tell them otherwise.
File and Keep
File your 1042-S form somewhere safe, when you receive it. You may need it when you complete your tax return, and HMRC could ask to see it at any time. (You should retain it with all of your other financial documentation.)
If you have any queries concerning your foreign income, then you may find it useful to seek advice from an accountant.
While these forms can seem a little confusing, I always see them as as good sign. It means we’re selling our words!