Payment to a Foreign Artist or Foreign Artistic Group
The IRS has withholding requirements and procedures that organizations should follow when inviting Nonresident Alien artists to perform within the United States (Treasury Reg 1.1441-1(b)(2)(ii) and IRS Pub. 515.).
Payments to Nonresident Alien (NRA) artists for personal services performed in the United States are generally considered U.S. source income irrespective of the payer's place of residence, where the contract for services was made, or the place of payment.
Payment is considered made if the person or group realizes income.
Personal services include wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. The income is taxable to the foreign artist whether paid in the form of cash, services or property.
Generally, a foreign person, whether a foreign corporation or an NRA individual, is subject to U.S. tax on U.S. source income at a tax rate of 30% on the gross payment. The University of Richmond is required to withhold the 30% and remit the amount to the IRS. Tax laws and regulations are clear on the matter that the 30% withholding applies to the gross payment, not net after commissions. So, even if the commission amount is paid separately to the agent, the 30% must be calculated on the full amount, not just the amount that is paid to the foreign nationals.
IRS employee Cecile Glunt, the CWA Program Manager, has given an opinion on travel reimbursements in relation to NRA artists. Download Glunt's opinion with editor notes from Nancy Colón.
If a company, whether U.S. or foreign, is acting as an agent of the foreign entertainer, the withholding and reporting must be done as if the payment were made to the entertainer directly. This is in the Section 1441 regulations that were issued for payments made on or after January 1, 2001. This is because the withholding and reporting is supposed to reflect the beneficial owner of the income. The individual's company is acting merely as the agent for the individual.
Foreign artists should follow tax regulations carefully, as the IRS is looking carefully at foreign entertainers by reviewing visa, passport, and flight information to find high-profile entertainers who have failed to file tax returns.
The NRA artist may apply for an ITIN (individual taxpayer identification number) on IRS Form W-7. An ITIN is required to file an income tax return where the NRA artist seeks credit for the taxes withheld or to claim tax treaty benefits. An artist may apply for an SSN (social security number), however issuance is unlikely. University of Richmond's Office of International Taxation is able to assist with the ITIN application. Contact Nancy Colón.
An NRA artist paid by a U.S. organization for personal services performed in the United States is required to file a Form 1040 NR (or 1040NR-EZ) and to report such income. A tax return should be filed even if the income is exempt from US income tax.
At year end, the University of Richmond will file a Form 1042 with the IRS, whether tax was withheld or not. The beneficial owner of the income is the person whose name and address is on the 1042-S
Further information may be found in IRS Publication 515 "U.S. Withholding on Nonresident Aliens and Foreign Entities." Another helpful website is Artists from Abroad.
