A Surprise Tax Attack + A Visible Funding Goal


Surprise Tax Attack

Okie dokie, so this isn't the world's most fun post, but I feel like with all the recent support I've been getting, I should probably tell you guys something I've discovered since it's pretty crippling in terms of funding, haha.

So, while I do have a Patreon & Kofi, my games have been largely unknown, and so I didn't tend to get much in the way of donations towards development very often before now so it wasn't all that much of an issue on itch before. Now that more people have started helping put towards DD's future development, I'm quite shocked by how much of those donations is just getting drained away in the form of US tax >.<

Basically, I have itch set up to handle payments for me, and so I can't actually see what anyone has donated until 7 days after payment has been made. Today, I saw just how much of that has been lost in a tax black hole. Now, I realise that taxes have to be paid, of course, but the way things work in my situation is a little silly. Apologies in advance for the boring explanation below!

Due to poor mental health and being on the spectrum, I'm not exactly the most employable person on the planet! That means I spend much of my life unemployed because folks won't even give me a chance. So I bury myself in my projects. They are both my hobby, and my job, even if I don't get paid to do it, haha.

Due to being unemployed, or not earning all that much money during periods of time when I have managed to gain employment, I have never had to pay tax in my home country (the UK) because I'm basically considered too poor to pay tax! And so, I have never been given a tax code. That's where the problem is.

Itch says that certain countries have a tax treaty with the US and can get a reduced rate of tax by entering their tax code on the payment forms they use. The UK is one of those that have this treaty, but since I don't have a tax code, I have no choice but to leave that field of the form blank. So what happens when you do that? Well, itch has no choice but to set your account to default to paying the maximum US tax rate of 30% on every single donation.

So even if you are kind enough to add a tip when downloading the DD demo or any of my other games, 30% of your donation is immediately going to US tax >.< I don't think itch makes it clear anywhere though. I don't know about you, but if I were the one adding a tip or a donation, I would be doing so thinking that 100% of that was actually going to the developer to help with the development of their projects.

A Visible Funding Goal On Ko-Fi

So, in light of that, I figured I'd make this post to warn any of you guys who might be thinking of helping with funding in the future just so you know. I also wanted to say that I've decided to set a funding goal up on Ko-Fi so that you can see the progress of funding much clearer :3

A friend recently told me about Ko-Fi, suggesting it would be a good idea to try and raise funds for projects on there rather than itch because it's a UK company and therefore should fall under UK tax law where I shouldn't need to pay taxes unless I magically begin receiving a hell of a lot of donations, haha. It seems Kofi also has a subscription model, but since I'm on Patreon, I'll keep that for subs and use Kofi for one-off donations!

I tried looking into it all tax-wise, but it's so incredibly confusing! It seems as though because itch is a US company, they have to abide by US tax laws so they have no choice but to default people in weird circumstances like me to the full-blown 30% cut. A lot of information on how taxes work for donations and crowdfunding is about businesses and small companies, but I'm just an individual who has never had much money throughout the course of her life xD I don't know what information applies to me.

Whatever happens and however it works, every single bit of funding that I do get will go directly into the game's future development to help me afford to pay voice actors and such! I'm happy to never pay myself a penny if it means I get to complete the project in the way I envision it, haha. 

I also want to say thank you once again for all the incredible support! You guys are so awesome <3 Have a wonderful weekend ahead!

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(1 edit) (+2)

Don't know if this is still an issue, but if any potential buyers are okay with paying a bit extra, here's how you can ensure you send at least X amount to @melancholy-marionette. First, convert how much you want to pay in GBP into your native currency. Right now, the exchange rate is 1 GBP = 1.34 USD so if I want to pay 5 GBP, I have to pay $6.70 USD.

To cover the 30% tax cut, remember that 100%-30% is 70%. You will want to divide the payment amount by .7 or multiply by ~1.43 (NOT 1.3). So if I divide 6.70 by .7, I get ~9.57.

So to pay @melancholy-marionette 5 GBP, I'll need to send $9.57 (9.58 to be safe).

EDIT: I forgot about the PayPal fee. So that's 3.5% plus .39 GBP.

So, divide 9.58 (which I already sent) by (1-.035) and we get ~9.93 USD. Converting .39 GBP to USD comes out to ~$0.52 USD. So I should have sent $10.45. This doesn't account for the itch.io fee which varies by the developer so I'm not even going to try.

(+1)

Sorry for my super slow reply >.< I just wanted to say thanks for taking the time to type that up :3 It is still indeed an issue, and it looks like it's one I'll likely never be able to do anything about, haha. 

Really, itch should have an option that shows customers and supporters how much the dev is actually getting, because it does kinda suck if someone thinks they're sending X amount of money to support a dev, only for the dev to only receive a fraction of what's actually being sent >.<

And also, thank you so much for the support :3

(+1)

Hi, it seems like you have done a lot of research for the tax ID thing, but Maybe you have one already? I live in Canada and the "Tax ID Number" we used is called the Social Insurance Number.  It is issued by the government, and you don't need to actually pay taxes for having it, like if you are minor for example. I know in the USA they have a similar "Tax ID Number" that is called the Social Security Number, although I'm not sure how this one is issued and what are the criteria. All that to say,  I guess you should have a similar government-issued ID in UK.... I think in the UK they call it a National Insurance Number, you might have one already, if you worked before...?

On a side note, I recently found my only son (4 years old) is on the spectrum... He seems to have a very good memory, and to be good at figuring out how things work, like mechanisms, like a door handle... Or taking a chair to access things out of reach, but his communication skills are very much lacking... as he struggles to get the motivation to learn a language... All that to say, that I found very encouraging to see what you were able to accomplish, as it gives me some hope that things will improve... I hope you won't find that offending...

(+1)

Hey :3 I didn't even think of that, so it's definitely worth giving it a go! Thank you for bringing it up :3 I think I was given a national insurance number when I was a teenager, so I've got one I can try. Itch never did respond to my follow up email, so I'm still clueless as to where all that withheld money ends up >.<

And no worries, I don't find that offensive at all :3 While I'm certainly no expert, I've taken the time to look into resources my therapist has recommended on the subject, and from what I understand, the spectrum is incredibly broad with everyone being impacted differently. With your son still being so young, I guess it's hard to tell what will happen as he grows, but I'm sure whatever happens, with your support, everything will work out alright :3

I'd be nowhere without my dad. My diagnosis is Aspergers/high-functioning autism. When discussing this with a professional for the first time, he said he doesn't like the term 'high-functioning' because it almost suggests that the person is able to function just fine, but he said he understands the need to differentiate the kinds of functioning that each person has. So for example, while I'm capable of doing things like I am here, making visual novels, socially, I'm useless >.< So I can function in my own little bubble world if someone (my dad) is looking after me, but I couldn't function on my own because my anxiety and social skills are so dreadful that I can never gain or keep regular employment :( I can't even do basic things like phone up for an appointment if I need one because using the phone to speak to strangers terrifies me.

On top of that, I sometimes have complete breakdowns where I'm not capable of anything, even working on my projects. It means my productivity is very up and down and fairly unpredictable. One day I can be up for 15 hours working away with laser focus, another, I can wake up and feel incapable of doing anything, like someone's just switched me off >.< It's a constant struggle, but I'm thankful to have my dad and to be getting professional help!

With your son, it's good that you found out he's on the spectrum while he's still young. Because my diagnosis wasn't made until I was already an adult in my late twenties, the people I've been seeing think I developed anxiety and depression as a young teen because I didn't fit in and no one noticed, so I just struggled alone and was left out. I didn't get the help that I needed to properly develop social skills as a youngster and learn how to cope with being on the spectrum. 

If your son likes tinkering with mechanisms, you never know, he could end up becoming an incredible engineer when he's older :D

(+2)

As someone who also is on the Spectrum and has Anxiety I feel you. I've always found it hard to put myself out there for a job too and even struggled when applying for college. I hope you're able to settle all this Tax stuff and get the money back if that's possible! 

(+3)

I'm sorry you've got a similar struggle :( It really is so hard when people won't even give you a chance in the first place >.< Like I said in one of the other comments, over here, they encourage you to lie about your mental health at interviews, and I can understand why, but still >.< It would be nicer if places could just adapt a little and help folks out instead of slamming the door in your face.

I'd absolutely love to try and get back into education, but my anxiety is at a point now where I just wouldn't be able to cope with the social side of college or uni at all, sadly. Not to mention the fact that I couldn't afford it in a million years, haha.

I hope things get better for you at some point :3

Itch actually did finally respond to me, but I have a feeling my message wasn't read properly because the person who got back to me just told me that if I use the tax number from my own country, I should get the tax discount. But in my email to them I stated that the problem is not having a tax number from my own country in the first place because I'm considered too poor to pay tax here and therefore haven't been issued one >.< I guess I'll just have to try again with my message!

(+3)

I just wanted to say that I empathise a lot with you, as someone else on the spectrum who is basically unemployable, and I'm sorry you have to deal with all this very confusing tax/legal nonsense! I hope it all works out for you & I wish you the best ♥

(+3)

*High five* for spectrum buddies, haha. Yeah, uhm, I once had a  work coach advise me to essentially lie about and cover up my ASD + anxiety and depression on my CV and at any interviews because they told me that while employers are technically supposed to not discriminate, they will >.< and that the trick is to lie until you get the job, then tell them once you're in because they can't fire you based on that once they've hired you o.O I just thought that was insane. I totally understand why they would say that, but it's saddening because you shouldn't have to do that in the first place to stand a chance at getting a job. Aside from that, I'm pretty much incapable of lying because if I attempt it, not only am I dreadful at it, but I will also feel so terrible that I won't be able to go through with it in the first place or will immediately revert to the truth moments after the lie xD

Thank you for the kind words :3 I hope everything works out for you too! And best wishes right back at ya ^-^

(+5)

As far as your US tax situation is concerned, the money that is taken out is not a flat tax, but should be withholding against any tax that you may owe at the end of the year. If you don't have an Individual Tax Identification Number (ITIN) in the US, I don't know how itch.io could have submitted the payments to the US Internal Revenue Service. Not knowing how much money is involved here, I don't know if it is worthwhile for you to engage an accountant in the UK who has knowledge about US tax laws, but if the tax is more than the accountant's fee, it would be worthwhile, because your US Income Tax is based on your income minus allowable deductions, so you may be able to be refunded part or all of the money that was withheld by itch.io. Even though I worked for an accountant in the US for about 20 years, we did not dela with international clients, so I can not give you any other advice. Perhaps someone your situation would be able to get government assistance with engaging a qualified accountant. In the US, someone with any health issues that make them unemployable can be certified as such by a government agency. If the UK has anything similar, it may be good for you to look into this as well. I hope all this diverse information hasn't been too confusing; perhaps you could take some paper and make a list of the different points I brought up so you can examine them individually. Of course, feel free to reply if there is anything I can clarify for you. Best wishes.

(+2)

Thanks so much for taking the time to type all of that up! I really appreciate it.

Actually, I'm now even slightly more confused about the tax that itch withholds because with the knowledge you've just given me regarding what it actually means for them to withhold tax, I don't understand where that % withheld is going eventually, haha.

So then, if they can't submit payments to the US Internal Revenue Service because I have no form of tax ID in the US or the UK, what on earth happens to the money that's been withheld? :o

As I mentioned, due to my mental health, I'm unemployed, so I don't even have an income at the moment. Thankfully, I have the world's most wonderful and understanding dad who believes in what I'm doing with my projects and is happy to support me by allowing me to live with him and such. I suppose I can't possibly be refunded part or all of the money that itch withholds for tax since there's no way for them to track things properly without me having the tax ID number, but if I can't be given it back, and it can't be paid to where it's supposed to go, I just don't understand what happens to it in the end, haha.

When I released my first game here for free just a little over a year ago, I did get a handful of donations. And the 30% was withheld from those. I didn't bother to question it at the time because I figured I was unlikely to get much in the way of donations through itch anyhow. Over a year has passed, and I definitely didn't get anything back from what was withheld because I just got the one-off payment from itch when I chose to withdraw what was there. I'm curious now as to where that withheld money would have ended up.

I have no idea how much it would cost to speak to an accountant, but I would imagine what I've received so far in donations would be less than their fee since I've heard that accountants can be expensive. So it's not a huge amount of money we're talking about. Well, it's huge to me! But to the average person with a job, probably not so much, haha. (Around $350 before accounting for the 30% tax withheld.)

We do have something here called the Citizens Advice Bureau, which is a free service anyone can access and covers all different things people might need help and advice with, including money-related matters. The trouble is, with my anxiety, I'm not capable of calling places up to make appointments and things like that, and many places aren't particularly accessible in that way because they require you to phone them in order to speak to someone. To be fair, the CBA does have an online live chat option, but the problem is, the people working that have a sort of script to go off of and so can't really help with personalised advice.

Over here, it sort of seems like if you have mental health problems, depending on the area you live in, and the funding allocated to the area, you're in a lottery as to what aid is available to you. And, unfortunately, in the town I live, there is very little help on offer. I do see a therapist (free of charge on the NHS), but even she told me she is annoyed that those diagnosed with ASD can access ASD-specific help and therapy IF they are in a catchment area that has the funding for it. She said that the place she works at has been asking to get one on their team for over a year now, but has just been refused time and time again. Yet in a city 30 mins drive from where I live, the service is available, and my dad would gladly take me there. However, because I do not live in that city, I cannot access the service. It's all very frustrating!

My therapist has put me on a waiting list for a free service to talk to a coach about various things related to eventually trying to somehow make a living from my project work in the future because she believes that I have more chance of succeeding with that than traditional employment. So I can definitely bring this up with her when the time comes and see what she has to say about it all.

Thank you once again for everything!

(+3)

Thanks for your reply. Perhaps the CIB has an option where you can email them with your questions rather than  visit in person or chat online. It may be easier to get info that way. I'm sorry that your government has such a restrictive policy about aid. Hope that you can get some soon. As far as the taxes are concerned the form you have to file to the IRS is called a 1040NR (for non-resident). There is no real hurry, because IRS regulations say you have three years to file your return before you will lose any refund you have due. Since you are not a resident and spend no time working in the US, you should owe no taxes. The other possibility (which I hope is not true) is that Itch is taking the money out to pay THEIR taxes. I've heard other devs complain about how much Itch takes out. Perhaps you can contact Itch and ask them where the money is going. Good luck.