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Frequently Asked Questions (FAQs) About Central Withholding Agreements

The Internal Revenue Service (IRS) has received the following 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.


1. What are the benefits of a CWA?

The tax code requires withholding on most types of gross income of nonresident aliens at the rate of 30 percent.  For nonresident alien athletes and entertainers performing independent personal services, a provision has been made to request a reduced rate of withholding through a CWA which:

  • Designates a single withholding agent to withhold and deposit an agreed upon amount and relieves all other withholding agents from withholding on the specified events for the specified period of time covered in the CWA,
  • Allows the IRS to evaluate the income and estimated expense budget, and related documents, to determine a potential net taxable income of the personal services provided,
  • Results in the computation of withholding based on the graduated tax rates used on the tax return and applied to the potential net income determined in the budget analysis, and
  • Provides for withholding that more closely relates to the ultimate tax liability, thus not tying up the nonresident alien athlete’s or entertainer’s funds until a tax return is filed.

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2. Can a resident alien athlete or entertainer enter into a CWA?

No. The regulations under section 1441 of the Internal Revenue Code which authorize CWAs do not apply to resident aliens.  

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3. The Rev Proc states that CWA requests are due at least 90 days before the start of the tour.  The instructions state they must be received 45 days prior to the first event to be covered by the CWA. Our tours are often confirmed MUCH closer to the start date than 90 days out. What happens if the agreement is not approved by the start of the tour? Will 30 percent be withheld until the approval? And, if so, when would the performers get it back?

The Rev Proc 89-47 does indicate a 90-day window for processing the request. Effective January 1, 2013, requests received less than 45 days prior to the first event to be covered by the CWA will not be considered for a CWA. The withholding agent, as determined by the tax code, is responsible for withholding at 30%.  The individual entertainer or athlete will be able to apply for a refund of any excess withholding when he files his Form 1040NR at the end of the tax year.

In order for the central withholding agreement application to be accepted for processing, it must include the following minimum information:

  1. Application Form 13930 or other written documentation to include at least:
    1. Name of the NRA to be covered by the central withholding agreement
    2. SSN or ITIN of NRA, if known
    3. Tour event or event to be covered
  2. Penalty of perjury statement signed by either a valid Form 2848 holder or by the Non Resident Alien (NRA).
  3. Form 2848 or Form 8821 unless the NRA is representing himself (if POA is on file for the dates requested, no new POA is needed but statement should be included in application).
  4. Preliminary Itinerary for the Events to be covered by the CWA.
  5. Preliminary budget for income and expense for the events to be covered by the CWA. The application should include deal memos, contracts or any other income source for which there is a close approximation to the live events.

Additional income and expense items requested by the IRS of the applicant must be submitted within the timeframes specified in the request from the IRS to continue the application process.

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4. We are an agency for dance and theatre companies (international and national). We are planning on bringing a Chinese and an Italian company to the U.S. in the next 12 months. These companies are not for profit in their own countries.  The IRS service center has informed me that Form W-8EXP would exempt these companies from withholding.  Is this correct?

A foreign organization that is a tax-exempt organization under section 501(c) of the Internal Revenue Code, or that would be exempt under that section if it applied for tax-exempt status, is not subject to a withholding tax on its U.S. source income unless the income is taxable under section 512 of the Internal Revenue Code as unrelated business taxable income. For a foreign tax-exempt organization to claim an exemption from withholding it must provide a Form W-8EXP to the withholding agent. The Form W-8EXP must be accompanied by either: (1) a copy of a tax exemption letter from the IRS, or (2) a letter from an attorney in the United States who attests that the organization would likely obtain tax-exempt status from the IRS if it applied to the IRS for such status. If the entity does not have tax exempt status but would qualify for a treaty exemption for business profits, the organization may present a W-8BEN to the withholding agent. The entity should check the applicable tax treaty between the country of residence and the U.S. for applicable tax treaty provisions.

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5. If a foreign company obtains a standard CWA with 0 percent withholding because such company does not make a profit when touring the US, will the company need to file a U.S. income tax return? Does a foreign company need to file a U.S. income tax return every year? Or just the years they have toured the US?

A CWA is only available for a nonresident alien athlete or entertainer who is a natural person.  A CWA is not executed with a foreign company.

A nonresident alien athlete or entertainer must file a U.S. tax return (Form 1040NR) for any tax year the performer was engaged in trade or business in the U.S or has other income subject to taxation regardless as to profit or loss. This is true even if no tax is due, withholding has already fully paid all taxes, or the performer claims tax treaty benefits (Treas. Reg. section 1.6012-1(b)).  This is true whether the performer had or had not secured a CWA.

A foreign corporation must file a U.S. income tax return (Form 1120F) if it was engaged in business in the U.S. or it claims tax treaty benefits or a refund.

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6. What withholding rate would we use if a U.S. corporation pays a nonresident alien as an employee?

Salaries, wages, or any other pay for employee services (referred to collectively as wages) paid to nonresident alien employees for services performed in the United States are subject to graduated withholding in the same way as for U.S. citizens and resident aliens.  The graduated withholding rates for wages are found in IRS Publication 15 Circular E, Employer’s Tax Guide. Refer to the special withholding rules which apply to wages paid to nonresident aliens found in Chapter 9.  Note:  If the U.S. corporation is owned or controlled by the non-resident alien athlete or entertainer, the corporation is deemed to be acting as an agent of the foreign individual and withholding, absent a CWA must be done at 30 percent of gross earnings paid to or for the benefit of the foreign person.

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7. What withholding rate would we use if a U.S. corporation pays a nonresident alien as an independent contractor?

Amounts paid for independent personal services performed by a nonresident alien (NRA) in the United States is subject to NRA withholding and reporting as follows: A U.S corporation must withhold U.S. federal income tax at the statutory rate of 30 percent on the gross amount of all payments unless the alien qualifies for and enters into a CWA with the IRS. A CWA is applicable to NRA athletes and entertainers performing personal services in the United States and may result in a reduced withholding rate. If an NRA is from a country with which the United States has a tax treaty allowing all income from whatever source  to be exempt from taxation by the other country, no withholding is required if the individual athlete or entertainer has secured a taxpayer identification number and filed Form 8233 with the withholding agent.  If the athlete or entertainer has not secured the taxpayer identification number they are unable to file Form 8233 but can file for a CWA with potential for a reduced rate of withholding.  See Publication 515, Withholding Tax on Nonresident Aliens and Foreign Entities for additional information.

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8. Many boxers incur foreign training expenses prior to arriving in the U.S. for their bout.  Would these expenses be allowed in estimating tax liability for a CWA?   

Training expenses a fighter incurs in preparation for a specific bout being held in the United States are allowed as deductible expenses in estimating tax liability for the purposes of a CWA if it is determined that these expenses are associated with the income earned in the U.S.

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9. The foreign entertainers that I deal with always present a W-9 from their U.S. Corporation or a W-8BEN from their foreign corporation; therefore the need for a CWA doesn’t exist…..right?

If you are presented with either a W-8BEN for a foreign corporation, a W-9 for a U.S. corporation, partnership or LLC, the entity may be acting as the agent of the foreign person. Under Treas. Reg. §1.1441-1(b)(2)(ii), you must treat any payment to such a corporation as being made directly to artist and, therefore, you must withhold U.S. income taxes accordingly.  A withholding agent is indemnified against all claims and demands of artist relating to the withholding under IRC §1461. Treasury Regulation section 1.1441-1(b)(2)(ii) reads in part, “[a] withholding agent making a payment to a U.S. person... who has actual knowledge that the U.S. person receives the payment as an agent of a foreign person must treat the payment as made to the foreign person.” This means that if the withholding agent is making a payment to a U.S. corporation or other U.S. entity knowing or having reason to know that the U.S. corporation or U.S. entity is acting as an agent to collect funds on behalf of the nonresident alien, then the withholding agent must treat the payment as being made to a nonresident alien. The gross amount of the payment would therefore be subject to 30 percent withholding, and reporting on Forms 1042 and 1042-S, unless a CWA is in effect which would lower the applicable withholding rate.

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10. If a Form W-9 is presented to me by a foreign performer and contains both a current U.S. address and the Employer Identification Number of a U.S. Corporation, haven’t my withholding and reporting responsibilities been met?

The answer to the previous question would apply in this situation as well.  A withholding agent making a payment to a U.S. corporation or other U.S. entity, knowing or having reason to know that the entity is acting as an agent to collect funds which will be paid to a nonresident alien, must treat the payment as being made to a nonresident alien.  The gross amount of the payment would therefore be subject to 30 percent withholding, unless a CWA is in effect.

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11. If a tax treaty excludes a certain amount of U.S. income from withholding on payments made to a nonresident alien athlete or entertainer, will a CWA take into account payments less than that amount for an individual performance?

A CWA will not take into account a treaty based position. For withholding tax purposes, the amount that is exempt due to a treaty provision for athletes and entertainers most often has a threshold amount and once the threshold is reached, all U.S. personal sourced income is subject to U.S. withholding and tax. In the instance where a country has a treaty based provision where all income from whatever source is exempt from taxation, the artist or entertainer with a valid ITIN will file a Form 8233 with the withholding agent and no CWA will be needed. 

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12. Does a non-payer promoter on a co-promoted event have any liability for nonresident alien withholding?  

Under section 1441(a) of the Internal Revenue Code, any person having the control, receipt, custody, disposal, or payment of any item of taxable income payable to or for the benefit of a nonresident alien or other foreign person is subject to the requirement to withhold 30 percent U.S. federal income tax on the payment of such item of income.  This means that for any given athletic or entertainment event there could be several withholding agents who have a potential liability for withholding tax on any payments made to or for the benefit of a nonresident alien athlete or entertainer.  If a co-promoter receives funds that are not paid to or for the benefit of the non-resident alien athlete or entertainer, the co-promoter would not be liable for withholding.  An example of this would be in a professional athletic event where there are two promoters and one of the promoters is not promoting anyone who is a non-resident alien.  The funds received by that promoter are only for the U.S. resident athletes he promotes and there would be no withholding requirement for that promoter.  The co-promoter who is promoting the nonresident alien athlete would be subject to the 30 percent withholding requirement, absent a CWA.

When a CWA has been fully executed and signed by the athlete or entertainer, the designated withholding agent and the representative of the IRS, the designated withholding agent assumes responsibility for withholding and reporting tax on the entire tour or event, relieving all other withholding agents from withholding.

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13. Which IRS Publication addresses the CWA Program?

Publication 515, Withholding Tax on Nonresident Aliens and Foreign Entities discusses the CWA program. The publication deals with the withholding and reporting issues which arise in connection with payments made to nonresident aliens.

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14. How does one apply for a CWA?

Note: Effective October 1, 2012, all CWA applications must be mailed to the following address, or faxed to (866) 715-1507.

Central Withholding Agreement Program
Mail Stop: 1441
2001 Butterfield Road
Downers Grove, IL 60515-1050

Effective January 1, 2013, requests for a CWA must be received by the IRS at least 45 days prior to the first event to be covered by the CWA.  Requests received with less than 45 days prior to the first event to be covered by the central withholding agreement will not be processed and such event will be subject to withholding at 30% of the gross income as is required by IRC 1441.

Nonresident alien entertainers or athletes requesting a Central Withholding Agreement must submit the information contained in Form 13930 Instructions on how to Apply for a Central Withholding Agreement.

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References/Related Topics

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.

Page Last Reviewed or Updated: 24-Mar-2014