How to minimize the Medium tax of 30% withheld at source?

For those who are starting to write now on Medium, this story may seem strange to you. But anyone who has been writing on Medium for at least seven months, and makes some income within Medium, and is not an American or foreign citizen resident or taxpayer in the United States. You are aware that Medium has started withholding tax since January 2020 for all writers.

The medium began the year 2020 by withholding royalty taxes, for all writers to submit to the U.S. government, in accordance with tax law, for all accrued earnings after 1/1/2020.

The first payment started on 2/8/2020, and for American writers, the retention rate is zero. This means that, for American writers, the amount you see on your panels is the amount you will receive after accumulating all the monthly earnings you have earned.

For non-US writers (non-resident foreigners who are not US taxpayers), the withholding fee is determined based on the country you registered on the W-8 tax form and any tax treaty benefits you claimed.

So will a portion of my earnings be retained for the US government?

No. The first withholding payment started on 2/8/2020. However, no money is retained by Medium, and no money is retained by the US government. This is because Medium must issue a 1042s income tax form to non-resident foreigners who earn from the Medium Partner Program in order to comply with U.S. law.

According to IRS guidelines, Medium provides all writers with a 1099-MISC or 1042s tax form based on earnings limits for each year in which you earned and received payment as part of the Partner Program. And while most 1099-MISC or 1042s are generally considered taxable income, Medium cannot provide tax guidance. If you have any questions, Medium recommends that you contact a tax professional.

So why am I being withheld tax if Medium cannot provide tax guidance where half of my earnings go?

Medium partners with Tipalti, a trusted payment partner, to collect and store any personally identifiable information from users. When you submit your taxpayer information on our website, it is sent directly to Tipalti without ever entering the Medium system. Tipalti is compatible with SOC2 for user data.

Once a year, Medium’s finance team generates and sends 1099-MISC forms to writers who have received the money. Form 1099 will come from a company called Track1099. Throughout this process, users’ personal information will still not be stored in the Medium system.

And who is Tipalti?

Tipalti is a trusted payment partner for Medium (used by several other companies, including Amazon, Twitter, Twitch, and more). Medium has partnered with Tipalti to securely and reliably collect and store personally identifiable information from users. When you submit your taxpayer information on our website, it is sent directly to Tipalti without ever entering the Medium system.

Tipalti is compatible with SOC2 for user data. SOC2 stands for Service Organization Control 2, which is a security and privacy certification. Certification means that Tipalti undergoes regular audits to ensure that its controls related to security, processing integrity, confidentiality, and privacy are up to date.

How do I minimize this rate?

As noted above, Medium’s retention rate is determined based on the country you registered on the tax form and any tax treaty benefits you claimed. If you reside in one of the countries listed below, take a moment to resubmit Form W-8 and select your country of residence in the “Claiming Treaty Benefits (Part II)” section.

List of countries with tax treaties with the USA:

Armenia, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Bulgaria, Canada, China, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, India, Hungary, Iceland, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, South Korea, Luxembourg, Mexico, Malta, Moldova, Morocco, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russian Federation, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Tunisia, Trinidad and Tobago, Turkey, Turkmenistan, Ukraine, United Kingdom, United States, Uzbekistan, and Venezuela.

I live in one of those countries on the list, I sent the form and I am still 30% withheld. What is going on?

There are three types of forms, two of which are for non-US foreigners. Form W-9 is for US taxpayers. If you are a United States citizen or qualify based on the IRS W-9 instructions, you must select the “W9” radio button.

For foreigners not residing in the United States with countries without tax treaties, the form to be completed is W-8BEN. For foreigners not residing in the USA, but in countries with a tax treaty with the USA, they must complete form W-8BEN-E, after filling, select the country of residence to claim the rights.

And what is the rate for countries with a tax treaty with the United States?

I investigated through Medium writers, and from the information, I collected, all writers who live in those countries are retained 5%, and the countries are Canada, England, Portugal, Philippines, and India.

What happens after I resubmit my tax information?

After your tax information is confirmed, you will receive a confirmation email. If for any reason, your tax information is not validated, an email will be sent asking you to review any errors.

After generating earnings in the Partner Program, Medium will issue your payments according to our payment schedule. Then, in January of each year in which you won and received payment from Medium, you will receive a 1099-MISC or 1042s form.

We prefer to provide your tax forms electronically so that you receive an email invitation to accept the electronic format. If you choose not to accept it electronically, we will email your tax form by the IRS deadline. The IRS deadline for 1099-MISC or 1042s is usually around January 31 of the new year, for the previous year’s fiscal period.

There is nothing you need to do to start sending the 1099-MISC or 1042s. The medium will send automatically, as long as you have won in the Partner Program and received payment.

All information written here was written based on information from the Medium support center, I just collected some additional information reported by Medium writers residing in countries with treaties with the United States.

Any debt, leave your comment that I will answer the measure. Thank you so much for reading.