Central Withholding Agreements (CWAs)

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Artists and Athletes from outside the United States, were you aware that thirty percent of your U.S. earnings, including merchandise sold during performances and games, should be withheld for the IRS? This new policy assures that taxes are paid when needed.

However, many of the artists I know from other ccountries don’t make enough money here to have to pay taxes or live in countries with tax treaties with the Unted States. What to do?

This is where the Central Withholding Agreement comes in. You have to be organized, though, to obtain it.

Basically, up to 45 days before your appearance in the United States, you or your representative needs to assemble a budget for your travel and performances. It must be thorough and precise. You can’t say you’re flying from London to New York, you have to state Heathrow to JFK and how much the flight costs.

Every member of the tour must be listed, including any tech, handlers, sound designers, make-up artists, etc. Then, the performers can ask that no money be withheld or that less money be withheld based on a tax treaty. Unfortunately, support staff are not eligible for the CWA, so their incomes must be reduced by the requisite thirty percent. Once they file their US tax return, they may receive a refund.

Which brings me to the next catch. Foreign artists and athletes entering the US must obtain a Social Security number. Before last year, people coult get an ITIN or Individual Tax Identification Number very easily. Now, in order to get the ITIN, one must send a passport to the IRS. Not a copy, either. The traveller’s visa must be valid at least 14 days after the visit to the social security office.

One other catch is that, if the artist or athlete has performed for money in the US over the past 5 years, they must have filed tax returns for at least the past 3 years, even if they paid no taxes. Every worker from abroad making money in the United States must file a U.S. tax return, regardless of tax burden.

No, they are not making this easy.

Then you need to get in contact with someone who will hold the money for you until it needs to be paid to the IRS like CWAManagement. They can take care of all these steps for you, or just some of them. It costs, but if you’re doing a long tour, it’s well worth it.

For more information about CWAs, look at irs.gov.

About

Dunia Best Sinnreich is an Enrolled Agent, Music Composer and Performing Artist. She has made it her mission to help small businesses, individuals and artists achieve the financial goals that it takes to keep reaching greater heights.
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