Okay as promised, I took notes at the international tax session at the WAA conference. It was actually a hot topic. The session was scheduled for about 1.5 hours but at the end of the time it ended up moving to another room and continuing. (I moved on to a grants session because I had notes on 90% of what I wanted to know.) Then the discussion apparently infiltrated an Arts Presenter’s session as well.
The speaker at the session was Stanley E. Majors: Attorney, Fettmann, Tolchin & Majors, P.C.. (CPA and Tax Attorney licensed to practice in DC, MD and VA)
Among the things I learned was:
-Tax treaty is determined by place of residence. A French national residing in Switzerland falls under Swiss treaty.
-Everyone in the payment chain-presenter, agent, manager, etc can act as the collection agent of the 30%. The IRS typically starts at the end of the chain with the last person to handle the money before the artist gets it when researching if the money was collected. Mr. Major’s suggestion was to put something in the contract that stipulates who will be the party responsible for withholding. Obviously, many of the presenters’ preference would be for the agent or manager to be the responsible one.
Though empowering everyone in the chain to collect the tax looks like the IRS is just increasing the number of people they can blame, Mr. Major assured us that it wasn’t the case. Nor is it so they can collect the tax multiple times.
-The Alien has to fill out a certificate 8233 to claim exemption if they feel they are entitled to keeping their 30% The IRS has 10 days to agree with the exemption or not. A presenter can not make a decision to withhold or not unless they file. (For example, if you have someone coming in for 1 day and they are making $1000 to speak and then leaving the country and you know they fall below the exemption threshold, you still can’t exempt them unless they file.)
-If you know that a person has falsely filed an exemption, you have to withhold. You don’t necessarily have to research their entire tour schedule, but if you know that they are performing in a city south of you one night and a city to the north of you the night after for the same rate they are charging you and it exceeds the exemption amount and they file an exemption, you can’t accept it.
-Article 16 or 17 of the tax treaty is where the pertinent info is usually found. (For tax treaties, a good place to start is this IRS webpage. It contains links to more specific information, including the treaties, as you find you need it.
-This restrictive clause in the treaties only applies to performers and athletes. Their managers, lighting people, make up people, etc fall under a more liberal portion of the treaties. Apparently, the US actually wants people to come to the country and do business and the more liberal portions reflect that. The restrictive portions are to prevent people like the Rolling Stones from coming in, making millions of dollars and leaving. Unfortunately, since the Rolling Stones are making millions of dollars, they aren’t hurt too much by it, but the smaller folks are.
-Just like US citizens, the alien can get a refund by itemizing their operational expenses on a 1040NR at the end of the year.
-I spoke to Mr. Major specifically about a South African group with incorporation
and Fed. tax number in the US and his opinion was that the taxes didn’t need to be withheld since they are 1) obligated to file corporate tax returns every year 2) the IRS can exert enforcement powers if they lie, especially since so much of their income is derived in the US. (Which is probably why they incorporated in the US in the first place–to avoid the bite) Of course, to get him to issue an opinion the IRS would care about, I assume we would have to pay lots of money.
-If a foreign group claims to be a non-profit organization similiar to 501 (c) (3) in the US, you can request that the IRS make a determination if the organization meets the same criteria as a US non-profit.
That is about everything I learned. The one thing I didn’t note was whether you treat a group as 1 entity earning 10,000 or 10 people earning 1,000. I am told he covered that in a later session on the same topic so I am inquiring if a colleague took notes specifically on that since that was an area of concern for her.