Richard Stoller, CPA and partner at Fenton and Prager, said: “Despite the early enrollment deadlines and date, it is important to apply for a CWA because it reduces the pressure on travel flows by citing income tax on an individual basis, instead of deducting 30 per cent lump sum of gross income. It also simplifies financial management by setting all responsibilities within an individual. A CWA enters into force for payments covered by the agreement after agreement between all parties. A CWA will not take into account contract exceptions. The Central Holding Agreement (CWA) is a contract between the IRS, the foreign artist and a designated “intervention agent.” The retainer agent may be the artist`s agent or manager, an animator, an accountant or any other person independent of the artist and acceptable to both the artist and the IRS. When the artist receives a CWA, the IRS estimates the actual tax that the artist will owe on the tour or a series of events, and this is the amount that is denied to the artist`s income, contrary to the withholding of 30% of the artist`s gross income. As has already been said, because an artist can deduct certain commercial expenses from his taxable income and because the artist is taxed at staggered rates (often less than 30%), the CWA will likely significantly reduce the amount to be withheld from the artist`s payments. The traditional CWA is only available to artists with gross incomes in excess of $10,000 in a calendar year. Note that CWAs are only available to individuals and not to businesses. CWA applications must be received at least 45 days prior to the first event to be covered by the CWA.
The IRS does not process an application received less than 45 days prior to the event and, as a result, these events are subject to 30% of the gross income deduction. Foreign artists seeking a CWA must provide the IRS with specific information and documents about their U.S. representations, including contracts for all engagements and a detailed budget for U.S. representations. Based on the information provided, the IRS assesses the artist`s actual tax debt for earned U.S. income. There is a requirement – if the foreign artist applying for a CWA has performed in the United States in recent years, the artist must have filed U.S. tax returns for the years that report that income, whether it is a profit or a loss. If the artist has not submitted the necessary returns, he must do so before being eligible for a CWA.
In addition, the artist must agree to file a U.S. tax return in due course for the current fiscal year. All applications on Form 13930 CWA must be sent to the following address or faxed to 866-715-1507. Under a CWA, the withholding tax is calculated on estimated net income, not gross income and staggered tax rates for foreigners and U.S. citizens residing in the United States, instead of 30%. (Manual, Form 13930-A) A central withholding agreement is a contract between three parties: an athlete or a non-resident artist; A paying agent representing the athlete or artist; and the Internal Revenue Service. This contract provides the IRS with a budget for a tour or event, including an estimate of the costs paid by the artist or athlete. The IRS reviews the contract and informs the withholding agent of the amount to be withheld on the basis of projected net earnings and not GROSS revenues using the same staggered rates as those granted in the United States.