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How To Fix Upcoming Tax Changes to your YouTube Earnings (Explaining & Fill AdSense Tax info)

Hi there,
We’re reaching out because Google will be required to deduct U.S. taxes from payments to creators outside of the U.S. later this year (as early as June 2021). Over the next few weeks, we’ll be asking you to submit your tax info in AdSense to determine the correct amount of taxes to deduct, if any apply. If your tax info isn’t provided by May 31, 2021, Google may be required to deduct up to 24% of your total earnings worldwide.
What do I need to do?
In the next few weeks you will receive an email to submit your tax information in AdSense. The online tax tool in AdSense is six steps and will ask you a series of questions to guide you through the process to determine if any U.S. taxes apply. For more information on these changes and a list of tax info to prepare, visit our Help Center.
Why is this happening?
Google has a responsibility under Chapter 3 of the U.S. Internal Revenue Code to collect tax info from all monetizing creators outside of the U.S. and deduct taxes in certain instances when they earn income from viewers in the U.S.
For creators outside of the U.S., we will soon be updating our Terms of Service where your earnings from YouTube will be considered royalties from a U.S. tax perspective. This may impact the way your earnings are taxed, and as required by U.S. law, Google will deduct taxes.
How will my earnings be impacted?
If you provide your tax info, U.S. taxes may only be applied to your monthly U.S. earnings from AdSense (revenue earned from viewers in the U.S. through ad views, YouTube Premium, Super Chat, Super Stickers, and Channel Memberships). If no tax info is provided, your tax rate may default to the higher individual backup withholding rate (24% of total earnings worldwide). To estimate the potential impact on your earnings follow these instructions.
Thanks,
The YouTube Team

Google AdSense Tax Form: How much YouTube AdSense tax will I have to pay?

Once you sign-in and head over your Google AdSense account, you will notice required tax info message both in an outlined rectangle box and under your notification bell icon. Once you click to fill-in required information, you will be presented with a complex W-8BEN (for individuals) or W-8ECI / W-8BEN-E (for legal entities / Businesses / Companies) forms that require some important personal or business information. In case of individuals, this is a lot of personal and legal information to submit. You will most likely require a lawyer, tax advisor or help from your respective government department to properly fill out all the data required.

Google AdSense - US Tax Info - W-8 Tax Forms

Google AdSense – US Tax Info – W-8 Tax Forms

In the 3rd step of U.S. Tax Info form you will be presented with an option about existing tax treaty (see provided IRS link PDF document in last section below) between your country of residence and U.S. How much tax deduction will that provide depends on individual countries and regulations. If your country has a treaty, you must provide TIN number, which in case of individuals may simply be a unique social security number or alike (every country is different and you should consult your tax advisor with international experience).

Google AdSense - IRS US Tax Treaty - Yes or No option

Google AdSense – IRS US Tax Treaty – Yes or No option

Failure to provide proper information will default your account to a generic 24% worldwide tax deduction rate!

Google AdSense - US Tax Info Form - Final Step #6

Google AdSense – US Tax Info Form – Final Step #6
NOTE: selected options serve as an example / for demonstration purposes only!

However, even when you submit the tax information form, if your country does not have any special tax treaty with U.S., tax will remain at 30% rate for U.S. viewers. In the future, failure to submit U.S. Tax info form might even disable your AdSense account, although this remains yet to be seen.

Google AdSense - US Tax Info - Example Of Approved Form

Google AdSense – US Tax Info – Example Of Approved Form

Default U.S. tax form withholding (WHT) rates:

Motion picture and TV default WHT rate: 30%
Other copyright default WHT rate: 30%
Services default WHT rate: 30%

Tax Form Information Collection: Privacy Implications

Finally, all this brings us to the question of data privacy policy. Google will pass this information to IRS authorities, and they will be in possession of enormous amount of data about actual citizens and legal organizations from all over the world. Implications yet remain to be seen.

One thing is certain: the world we are living in is rapidly changing — for better or for worse.

The Decision Is Yours

Option : 1

You decide to submit proper tax information form and pay up to 30% tax on your earnings from U.S. based viewers alone (this 30% value may go down to 0% for specific countries and tax-exempt entities). Earnings from other countries / regions will remain at the same level before the change and will be subjected to your local country of residence regulations as they were before.

Example: Let’s suppose your country does not have any preferential tax treaties with U.S., which means you’ll be taxed by a considerable 30% rate. You earn $1000 each month total, out of which $500 comes from U.S. based viewers or visitors. This means that 0.30 x $500 = $150 will be deduced from your regular monthly income, and instead of $1000 you will receive only $850 as your finalized monthly earnings (effective reduction changes with U.S. viewership percentage).

Option : 2

You fail to submit proper tax information form. In this case, Google / YouTube will assume that you are a legal U.S. resident and your YouTube channel / AdSense account will be subjected to a 24% global (worldwide) tax if you are an individual, or 30% global (worldwide) tax in case of a business / legal entity. This is why it is important to submit your tax info form as soon as possible, to avoid extra tax deduction from your revenue when this law comes into force.

Example: As in our previous example, we still earn $1000 monthly, but this time we did not supply any tax information forms. Google will assume that we are U.S. residents and automatically tax our earnings with a global / worldwide rate of 24% (assuming individual account). Instead of $1000 you will receive ($1000 – 0.24 x $1000) = $760 finalized monthly earnings.

If you are a U.S. resident living outside U.S. territory, your tax obligations might still be in effect. Call your tax advisor to clear any confusion regarding this matter and be sure you make the right choices while filling the Google AdSense tax form!

Resources & Links

  1. U.S. tax requirements for YouTube earnings
  2. Tax requirements for MCNs and affiliate channels
  3. Submitting your U.S. tax info to Google
  4. Check your AdSense account type
  5. U.S. IRS Income Tax Treaties A-Z
  6. U.S. IRS Income Tax Treaties Table (Royalties, Film & TV and Copyrights columns)
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