ARTISTS
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USA Taxes - IndividualsThe information given here is of a broad nature and pertains to individual foreign artists (including members of ensembles) who are non-residents of the U.S. providing services as a "guest artist". The objective is to familiarize you with key terms and provide basic knowledge of the withholding and taxation requirements for foreign artists working in the U.S..
It is important to note the difference between withholding and taxation. Withholding is the way in which the Internal Revenue Service (IRS) is assured of payment of any taxes due and taxation is the actual tax (if any) owed. If there is withholding, the artist may receive a refund when filing a tax return for that calendar year.
The withholding and taxation for a particular artist is dependent on his/her country of residence, the amount earned in the U.S. and whether the artist, for tax purposes, is considered an "individual" or a "business". The following information pertains to individuals (including individual members of an ensemble).
See also the section: U.S.A. Taxes for Foreign Artists - Businesses
Click here for flowchart of USA Taxes for Foreign Artists - Individuals
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30% Withholding at the Source
Option 1: Obtain a Central Withholding Agreement (CWA)
Option 2: Accept the 30% Withholding
Option 3: Full Tax Treaty Exemption
Option 4: Employer / Employee Relationship
Applying for a Tax Payer Identification Number (SSN or ITIN)
Filing of Yearly Tax Return
30% Withholding at the Source
U.S. presenters, by law, are required to withhold 30% of the gross income being paid an artist at the source unless there is an exemption or reduction from withholding. This is the IRS' way of being sure it collects any taxes that may be owed by foreign artists. There are four (4) options available to reduce or eliminate the withholding tax at the source.
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Option 1: Obtain a Central Withholding Agreement (CWA)
For the majority of cases, this is the vehicle for individuals and individual members of ensembles. It is not for businesses. A CWA is a contract between the IRS, the artist and a designated withholding agent. The withholding agent may be the artist's manager or agent, accountant, presenter or anyone who is independent of the artist and acceptable to the artist and the IRS. One should apply for the CWA at least 45 days prior to the first U.S. performance, sooner if possible. Required materials for a CWA request include:
* IRS Form 13930 - application for CWA (artist and withholding agent contact information)
* tour/performance budget: income and expense schedules and net
* performance contracts
* itinerary
* Either IRS Form 2848 (Power of Attorney) or IRS Form 8821 - Tax Information Authorization (authorization for the withholding agent to file a CWA on the individual's behalf)
The IRS assigns an officer to the case who reviews the submitted materials and determines whether there is to be any withholding, and if so, the amount. The withholding agent must receive all tour/performance income, makes payments to the U.S. Treasury (if applicable) and files final report(s) to the IRS. While the withholding agent need not be U.S. based, he/she must have a U.S. bank account and be enrolled in the Electronic Federal Tax Payment System.
The budget submitted with the CWA application must show all projected income and expenses for the proposed tour or performance and the net to each individual(s). The IRS has become very strict with what it considers income and acceptable expenses. Income, aside from performance fees, may include projections on merchandizing, U.S. royalties from any source and complimentary tickets (unless for press). If per diems are paid to the artist(s), only 50% of the allowable per diems is allowed as an expense; the rest is considered income top the artist. A final accounting showing all actual income and expense must be sent to the IRS following the tour. Acceptable tour-related expenses include travel (or pro rata share if the U.S. performance dates are part of a larger tour), hotel, agency commissions, merchandizing costs (manufacture, shipping, royalties), administrative expenses (postage, phone), support personnel salaries, and visa fees.
If at the time of filing the CWA request additional performances have taken place during the same calendar year, information concerning these additional performances should be forwarded to the IRS, including the date, venue and fee for each performance, and whether or not any federal taxes were withheld.
If the CWA is granted, the withholding agent will receive the final CWA that the withholding agent and artist(s) must sign. The signed CWA is then sent to the IRS for final execution. The withholding agent will then send the fully executed CWA(s) to each presenter.
If touring the U.S. for the first time individuals and individual members of ensembles need not have a taxpayer identification number to apply for the CWA. However, while in the U.S. they must apply for a taxpayer identification number. Refer to Applying for a Taxpayer Identification Number (SSN or ITIN)
Individuals and individual members of ensembles who have toured the U.S. in the past must be current, or get current, on past federal tax returns before a CWA will be granted. In order to file a tax return the individual(s) must have a taxpayer identification number. Refer to Filing of Yearly Tax Return
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Option 2: Accept the 30% Withholding
If, for whatever reason, an individual or individual members of an ensemble cannot become current with their yearly U.S. tax returns and, hence, cannot apply for a Central Withholding Agreement, the individual(s) will have to accept the 30% withholding.
While in the U.S. the individual(s) must apply for a taxpayer identification number. At the end of the year the individual(s) will file a tax return and, pending the net, will likely receive a partial or full refund on the 30% that was withheld.
Refer to:
Applying for a Taxpayer Identification Number (SSN or ITIN)
Filing of Yearly Tax Return
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Option 3: Full Tax Treaty Exemption
The U.S has tax treaties with approximately 66 foreign countries. These can be downloaded from the IRS website. If the country in which you reside has a tax treaty with the U.S., do not assume you are exempt from withholding, or taxation. There are only a very few treaties that exempt a foreign artist from withholding regardless of the amount the artist earns in the U.S.. And, even with these treaties, there may be other requirements, such as the artist not having a "fixed base" in the U.S., or being in the U.S. for a limited amount of time during the calendar year.
Option 3 is currently limited to artists from the following countries: Armenia, Azerbaijan, Belarus, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Moldova, Poland, Russia, Tajikistan, Turkmenistan, and Uzbekistan. If an individual(s) is from any of these countries they are exempt from all withholding and taxation. However, the individual(s) must have a valid taxpayer identification number to claim a treaty exemption. If they cannot obtain a valid number, they must accept Option 2. If the individual(s) does have a U.S. taxpayer identification number the individual(s) submits IRS Form 8233 to the U.S. presenter(s) (or whoever the U.S. payer is). Each U.S. payer must complete Part IV of the form and send to the IRS within 5 days of receipt. The exemption from withholding is effective beginning 10 days after the form is mailed to the IRS. Therefore, it is important to file these in a timely manner, well before first payment is to be made. Form 8233 is valid for the calendar year in which it is completed.
Many tax treaties place a cap on how much an artist may earn in another country before taxes are due in that country. For instance a Canadian artist can earn up to $15,000.00 in a calendar year in the U.S. before any U.S. taxes are due. One dollar over that amount and the Canadian individual is subject to U.S. tax on the $15,001.00. However, this income cap before taxation does not automatically exempt the individual(s) from withholding and a CWA must be applied for.
One must study each treaty carefully to determine if the foreign artist's income is subject to taxation, and, hence, subject to withholding. When studying a treaty, look for provisions concerning artists / entertainers specifically or, if no such provision exists in the treaty, "Independent Personal Services".
Refer to:
Applying for a Taxpayer Identification Number (SSN or ITIN)
Filing of Yearly Tax Return
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Option 4: Employer / Employee Relationship
If an individual is an employee of a company (employer) the employer is required to withhold U.S. employment tax at graduated rates (10%-35%) as determined by specific IRS tables and procedures, rather than the 30% withholding.
Determining whether or not an individual is an employee or an independent contractor is a very fact-specific analysis that will vary from situation to situation. The IRS website includes a discussion of the factors to be considered in determining if an individual is an employee or an independent contractor, which may be found here:
Independent Contractor (Self-Employed) or Employee?
As a general rule, individuals performing as "guest artists" are not considered employees, and an organization will not therefore be exempt from the NRA Withholding requirement under this category.
Refer to:
Applying for a Taxpayer Identification Number (SSN or ITIN)
Filing of Yearly Tax Return
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Applying for a Tax Payer Identification Number (SSN or ITIN)
A taxpayer identification number is required for all related IRS withholding and taxation forms.
The type of taxpayer identification number obtained is dependent on whether the artist is considered an "individual" or a "business". A foreign artist or group cannot simply set up a foreign or U.S. based company to claim a business tax treaty exemption. The Internal Revenue Service (IRS) looks at whether or not the artist or individuals in a group "participates in the profits" of the U.S. performances. For example - say a musical group from Quebec creates a corporation. They tour the U.S. and all tour related expenses are paid by the company and the net profit is then split between the individuals. These individuals have "participated in the profits". If, however, the musicians do not own the corporation and are paid a salary and said salary is not contingent on whether there is a profit or loss, the performers are treated as a business for tax purposes.
Individuals:
For individual artists and members of an ensemble (even if employees of a "business"), one needs to obtain either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN).
To apply for a SSN the individual(s) must complete Form SS-5 and apply in person at a Social Security Administration (SSA) office in the U.S. Anyone with an "O" or "P" work visa is eligible for a SSN. However, artist(s) must wait at least 10 days after arriving in the U.S. to apply as this is how long it takes for the information on the Form I-94 Arrival/Departure Record issued upon arrival in the U.S. to get into the U.S. government's computer database. The SSA requires at least 2 weeks to process an application. Be sure to provide a U.S. address where the SSA can send their determination. Often, a SSN is denied usually because an artist is here for less than 24 days. In this case the SSA will send a rejection letter. The artist(s) then sends the rejection letter to the IRS with Form W-7 (Application for IRS Individual Taxpayer Identification Number [ITIN]) and the IRS will assign an ITIN.
Also required with Form W-7 is a properly certified copy of the artist's passport. The certification must be done by a U.S. notary, or by a foreign agency authorized to issue an apostille. Other than having the passport(s) certified by a U.S. notary, the apostilled copy is the only certification that the IRS will accept. However, only certain agencies within countries that are members of the Hague Convention (Canada is a member) can issue an apostille copy.
If a foreign artist is not in the U.S. long enough to be eligible to receive a SSN, the artist(s) should at least have their passport(s) notarized by a U.S. notary. This is often easier to accomplish than acquiring an apostilled copy, especially if the artist is from a country that is not a member of the Hague Convention. In this case, when filing year end tax return, the artist includes the Form W-7 Request for ITIN, the notarized copy of his passport and an explanation of why the SSN rejection letter is not included (the artist was not in the U.S. long enough to be eligible to receive a SSN.) On the nonresident tax return, the artist must indicate how many days they were in the U.S. during the year. This will back up the explanation.
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Filing of Yearly Tax Return
All individuals earning income in the U.S., regardless of tax treaties, are required to file year end tax returns. Tax returns for non-resident individuals (independent contractors) are due June 15 each year for the preceding year.
The following tax forms are to be used for Options 1-4:
Options 1 & 2
Form 1040NR to report U.S. income and either Schedule C to deduct expenses or Form 8833 to claim a tax treaty exemption, if one exists. If the country the individual is from does not have a tax treaty with the U.S., the individual will file a Schedule C. If the artist is eligible for a tax treaty exemption, the individual will file Form 8833 to claim the exemption on income earned.
Option 3
Form 1040NR and Form 8833 to report U.S. income and claim tax treaty exemption.
Option 4
There must be a tax treaty with the foreign country. If so the employee files Form 1040NR and Form 8833 to claim the tax treaty.
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