Generally, if you are a nonresident alien entertainer or athlete performing independent personal services or participating in athletic events in the United States, you are subject to 30 percent withholding of gross income. You may be able to enter into a withholding agreement with the IRS for reduced withholding provided certain requirements are met. Under no circumstances will such a withholding agreement reduce taxes withheld to less than the anticipated amount of income tax liability.
Central Withholding Agreement (CWA)
A CWA is an agreement entered into by the non-resident alien (NRA) athlete or entertainer, a designated withholding agent and an authorized representative of the Internal Revenue Service. The agreement is for a specific tour or series of events and withholding is based upon the budget provided and net profits estimated. The CWA is not effective unless all parties have signed the agreement. The NRA must be in compliance for all required Federal Income tax returns and payment obligations. In the agreement you agree to timely file Form 1040 NR (or Form 1040NR-EZ) for the year in which the CWA covers independent personal services. If the tour covers a period that spans additional calendar years, more than one CWA may be required.
How to Apply for a CWA
Nonresident alien entertainers or athletes requesting a central withholding agreement must have filed and paid or made payment arrangements for all previous U.S. taxes. They must submit the information contained in Form 13930 which includes the following:
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A list of the names and addresses of the nonresident aliens to be covered by the agreement.
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Copies of all contracts that the aliens or their agents and representatives have entered into regarding the time period and performances or events to be covered by the agreement including, but not limited to, contracts with:
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Employers, agents, and promoters,
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Exhibition halls,
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Persons providing lodging, transportation, and advertising,
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An itinerary of dates and locations of all events or performances scheduled during the period to be covered by the agreement.
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Copies of documents regarding all income streams including but not limited to:
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performance contracts, deals or memos
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deal sheets or memos
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current recording contracts, deals or memos
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sponsorship contracts, deals or memos
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endorsement contracts, deals or memos
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merchandising contracts, deals or memos
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image and likeness contracts, deals or memos
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tour support and reimbursement documents
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A proposed budget containing all gross income and itemized estimates of expenses for the period covered by the agreement.
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The name, address, and telephone number of the person the IRS should contact if additional information or documentation is needed. A Power of Attorney form must also be filed before the IRS can discuss the nonresident alien athlete or entertainer’s tax requirements with a representative or withholding agent.
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The name, address, and Employer Identification Number (EIN) of the agent or agents who will be the central withholding agents for the aliens and who will enter into a contract with the IRS. "A central withholding agent ordinarily receives and keeps books of account of income, monitors related expenses, and pays all tax liabilities during the period covered by the agreement. The central withholding agent is required to provide a final accounting of the income and expenses that were projected in the CWA and remit any additional withholding tax required as a result of the final accounting".
When the IRS approves the estimated budget and the designated central withholding agents, the IRS will prepare the CWA. The agreement must be signed by a designated withholding agent, the NRA covered by the CWA and the authorized IRS representative.
Generally, the designated withholding agent must agree to withhold income tax from payments made to the nonresident alien, to pay over the withheld tax to the IRS on the dates and in the amounts specified in the agreement, and to have the IRS apply the payments of withheld tax to the withholding agent's Form 1042 account. The designated withholding agent will be required to file Form 1042 and Form 1042–S for each tax year in which income is paid to a nonresident alien covered by the withholding agreement. The IRS will credit the withheld tax payments, posted to the withholding agent's Form 1042 account. The designated withholding agent will issue Form 1042–S to each nonresident alien athlete and entertainer affected by the agreement. Each nonresident alien covered by the withholding agreement must agree to file Form 1040NR or, if he or she qualifies, Form 1040NR–EZ; and should attach Form 1042-S to his/her U.S. federal individual income tax return in order to get credit for the federal income tax withheld by the designated withholding agent.
A request for a central withholding agreement should be sent to the following address at least 45 days before the agreement is to take effect. Exceptions will be considered on a case by case basis.
Central Withholding Agreement Program
Internal Revenue Service
M/S 0175
110 City Parkway
Las Vegas, NV 89106
Form 13930 (rev 9-2008), Instructions on how to Apply for a Central Withholding Agreement is available on IRS.gov.
For detailed instructions refer to Revenue Procedure 89-47, C.B. 1989-2, 598.
The Internal Revenue Service (IRS) has received questions about Central Withholding Agreements (CWAs) from taxpayers and stakeholders during phone forums and other outreach events. The answers to these questions provide responses to general inquiries and are not citable as any type of legal authority. Refer to Questions About Central Withholding Agreements .
For additional information or questions about the CWA program, you may contact us via email at CWA.Program@irs.gov.
References/Related Topics
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