basic INFORMATION ABOUT TAXEs for foreign artists.

THE GIVENS

§  withholding and taxation are two separate entities
§  tax treaties do not exempt you from withholding
§  for any and all dealings with the IRS the beneficiary must have or apply for a tax ID number – either a SSN or ITIN - and file year-end tax return
§  30% withholding at the source if there is no Central Withholding Agreement (CWA) in place with the Internal Revenue Service (IRS) or other exemption

The 30% withholding at the source has been on the books since day one – it’s just that the IRS, for decades, put their energies into the big-name artists performing in large venues and stadiums, Broadway and the like. It was only about 10 years ago that they started to clamp down on the performing arts sector recognizing they had forsaken a good revenue source all those years.

WITHHOLDING vs TAXATION - don’t confuse the two
§  withholding is the IRS’ way of getting its $ up front should any taxes be due at year’s end
§  taxation is what the individual actually owes after completing a year-end 1040nr tax return

TAX TREATIES
Assuming the treaty has a provision for Artists (or Independent Services) that allows a certain amount of income before taxes are due:
§  does not exempt the artist from withholding or from filing year-end return
§  a tax treaty comes into play when the individual files a year-end 1040nr tax return
§  one exception is for individuals that come from a hand full of countries whose tax treaties include exemption from withholding - for the most part these are former Soviet satellite states

For the majority of beneficiaries a Central Withholding Agreement is the only vehicle with which to reduce the 30% withholding
A CWA must be filed with the IRS no later than 45 days prior to the first performance.
The individual must be compliant with past 3 year’s U.S. tax returns – here is where past avoidance can come back and haunt you.
Note that a group can apply for a CWA, however, in the end all personnel are treated individually on the CWA.

Support personnel and CWAs
Support musicians are treated in the same manner as the principle performer and must have a CWA in place prior to the event, otherwise they are subject to withholding at 30% of fees paid to them. 

Non-performer support personnel - in most cases there is a tax treaty in effect that declares non-performance income to be taxed in the home country of the individual.  In order to claim the tax treaty benefit, the individual must have either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). If no tax ID number than beneficiaries subject to 30% withholding on their wages.

U.S. Tax Payer Identification Number
Any and all communication with the IRS (CWA, filing year-end tax return) requires the individual to have tax payer ID number - either an ITIN (Individual Tax Payer Identification Number) or a SSN (Social Security Number).

An ITIN is not permanent and can be applied for from outside the country by a tax specialist.
A SSN is permanent but must be applied for in person at a Social Security Administrative office (located in almost every town, city in the country). An individual, when on tour in the U.S. should make every effort possible to fit in a visit to a Social Security office. One must have been in the country for 7-10 days and have 14 days left on visa when applying for a SSN.

For a referral to our tax specialist and/or for consultation about your particular situation contact us at:
++ 860567-2500
donverdery@gmail.com