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  • Daniel Gray CPA Toronto

Google IRS Withholding tax on ad payments and treaty reduced rates

Google says it rarely withholds United States federal tax from Google AdSense payments. However, it also say that it may be required to withhold up to 30% from publishers in these situations:

  • if you are subject to back-up withholding as described on Form W-9

  • if you do not fill in Section 10 on Form W-8BEN with a treaty number and 0%, and do not provide a United States TIN in Part 1 Box 6

  • if you do not claim complete exemption in Section 12 of Form 8233

  • if the tax information entered on your tax form is found to be incorrect or inaccurate

If you've had earnings withheld from a payment, it's because Google records indicated that you were subject to tax withholding at the time of payment. In this case, you'll see a line item for tax withholding on the Payments page of your account.

If you don't believe that you're subject to tax withholding, one can update the tax information in one’s Google account. Once you update your information to indicate that you're not subject to withholding, Google says it won't withhold any portion of your AdSense earnings going forward.

Google is unable to credit you for past withholdings; these are paid to the IRS directly as a payment towards your U.S. Federal taxes. The amount will be reflected in the Form 1099 or 1042 that will be sent to you in the first quarter of next year. If you're not subject to U.S. Federal taxes, please contact our office to prepare a refund claim for you to file with IRS directly to receive a refund.

Form 1099 or 1042?

Publishers are responsible for paying their own taxes resulting from participation in Google AdSense. In order to facilitate this, Google sends IRS forms 1099 and 1042-S to qualifying publishers as required by US tax law. Forms will be sent before the end of January.

Google sends a Form 1099 to you and the IRS if:

  • You submitted a Form W-9, are not a corporation, and were paid at least US $600 OR

  • You indicated that you are subject to backup withholding and had taxes withheld

Google sends a Form 1042-S to you and the IRS if:

  • You submitted one of the Form W-8s OR Form 8233

Google will not send you any forms or report your earnings to the IRS if:

  • You have signed the declaration of No US Activities OR

  • You have NO earnings from the AdSense program OR

  • You have submitted a Form W-9 as a corporation and did not have any taxes withheld OR

  • You have submitted a Form W-9, made less than $600 and did not have any taxes withheld

If you haven’t received or have lost your Form 1099 or 1042-S, you can request a new 1099 or request a new 1042-S.

USA tax I.D. (TIN)

If you are a U.S. business or individual, or a non-U.S. business with U.S. Activities and you do not have a tax I.D. such as a Taxpayer Identification Number or Social Security Number, you'll need to acquire one. Please contact our office to obtain a TIN such as ITIN or EIN. Why can't I submit a W-8BEN form as an individual for Google AdSense?

Google’s understanding is that due to the nature of the services provided by the Google AdSense program it cannot accept a W-8BEN form from an Individual. If you are a non-resident alien individual who earns revenue through Google’s AdSense program, this revenue is characterized as payments for personal services. Therefore, as stated in the instructions to the Form W-8BEN, you must complete the Form 8233 rather than the Form W-8BEN if you believe that you are entitled to an exemption from U.S. income tax withholding on AdSense payments by Google.

However, before you resubmit a Form W-8 or a Form 8233 Google recommends that you review its description of ‘US Activities’ (below) to confirm that you do have US Activities and are submitting the correct IRS form. If you do not have US Activities, Google says you will not need to submit any tax forms.

United States (US) Activities involve having employees or owning equipment in the US that are involved in any way with revenue earned through the AdSense program. This includes, but is not limited to, owning a web server or owning a hosting service in the US, or having employees in the US who are involved in either:

  • setting up a web server, hosting service, or website

  • developing content for your website

  • marketing to create a user base for your site

  • telephone support for your site

  • buying products for your site

  • maintaining your site

Google says that generally, utilizing an unrelated third-party US web hosting service to host your webpages, renting web servers that are located in the US from an unrelated third party, or having your payment sent to a US Post Office Box or mail forwarding address, do not of themselves constitute US Activities.

Google says that if you do not have US Activities, click on its Foreign Publisher with no US Activities link and agree to the statement on that page. In this case, Google says that no tax forms are required.

If you do have US Activities, Google says to follow the instructions on the Tax information page to update your current form, or to submit a new form.

Even Google itself says that the tax information collection interface and any tax-related information provided by Google is not intended as and should not be construed as legal, tax, or investment advice. You should always consult your tax advisor to help answer specific questions regarding how tax laws apply to you and/or your business and Google does not guarantee and is not liable for the accuracy or completeness of any tax information provided to it.

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