Mark Donenfeld and his team of experts in our Business Management Division of Adeptus share keen insights on Navigating Central Withholding Agreements for Foreign Artists & Athlete’s in the United States. 

A nonresident alien (NRA) artist or athlete, who performs in the U.S. are subject to U.S. income tax on their U.S.-source earnings. To ensure tax compliance, the Internal Revenue Service (IRS) mandates withholding on payments made to these individuals. An NRA artist or athlete performing independent personal services at a U.S. event will usually have 30% withheld from the gross income earned. However, there are practices in place that support foreign artists, including applying for a Central Withholding Agreement (CWA). 

Central Withholding Agreement (CWA): 

A CWA is an agreement between the NRA, a designated withholding agent, and the IRS. The withholding agent may be the artist’s agent or manager, a presenter, an accountant, or anyone else who is independent of the artist and is acceptable both to the artist and the IRS.  

Purpose of a Central Withholding Agreement

A nonresident alien (NRA) artist or athlete, who performs independent personal services during U.S. events, can apply for a CWA to request a lower withholding rate. When a CWA is in effect, it can be calculated at a reduced rate based on the net income earned.   

“Navigating Central Withholding Agreements can be intricate and demanding, especially when working to ensure compliance with the IRS regulations,” says Mark Donenfeld, a Partner in our Business Management Division of Adeptus. “The role for our team is to streamline this journey for you and ensure that you meet all the necessary requirements without unnecessary stress.” 

Steps for an NRA Performing in the U.S.: 

Application for a Central Withholding Agreement

To apply for a CWA, the NRA artist or athlete must provide all requested documents and information to the IRS no later than 45 days before the first U.S. itinerary event. As the withholding agent, Adeptus Advisors will provide the IRS with: 

• Tour itinerary 

• Preliminary budget 

• Supporting documents such as performance agreements and proof of expenses 

We remain in contact with the IRS to provide any additional documentation requested. It’s important to note that the IRS does not process applications submitted after the 45-day deadline, and such events will be subject to the standard 30% withholding on gross income. 

Application for a Social Security number  

A nonresident alien (NRA) artist or athlete performing personal services must apply for a Social Security number (SSN) upon arrival in the U.S. Getting an SSN will help the NRA meet all U.S. taxpayer identification number requirements. 

Reduced State Income Tax Withholding 

In addition to federal income tax imposed by the IRS, there are states who have a separate tax percentage of their own (ex. 7% in California) which must get paid by the artist or athlete. Tax percentage amounts vary by each state. Only a select few states offer applications for a reduction in tax for which we can help apply where necessary. Any tax amounts withheld by the artist or athlete will be reported on the individual’s state tax return, where a refund can be issued. The individual artist or athlete must have a U.S. Social Security number applied to the tax return in order for the refund to be issued by the state.  

Filing U.S. tax return  

A nonresident alien artist or athlete must file a U.S. tax return (Form 1040-NR) for any tax year the performer was engaged in trade or business in the U.S or has other income subject to taxation regardless as to profit or loss. This is true even if no tax is due, withholding has already fully paid all taxes, or the performer claims tax treaty benefits. This is true whether the performer had or had not secured a CWA. Any withholding tax paid to the IRS gets reported on Form 1042-S which we can also help prepare for obtaining tax refunds. The individual artist or athlete must have a U.S. Social Security number applied to the tax return in order for the refund to be issued by the state. 

Our Personalized Approach

By choosing Adeptus, you’re choosing a partner that is not only well-versed in the intricacies of Central Withholding Agreements but is also dedicated to your success. We are prepared to go the extra mile to help you achieve compliance, manage the paperwork, and provide you with the peace of mind you deserve.  

Let us take the reins and guide you through the Central Withholding Agreement process, allowing you to focus on your core priorities. Contact us today and let’s work together to ensure your adherence to IRS regulations while minimizing any potential complexities.