5.24.1  Overview  (07-28-2009)

  1. The Central Withholding Agreement (CWA) program is a pre-filing program for nonresident alien (NRA) athletes and entertainers performing independent personal services in the U.S. who wish to enter into a withholding agreement.

  2. This IRM section provides procedural guidance to CWA tax specialists.  (07-28-2009)

  1. IRC §1441 requires a withholding tax rate of 30% on U.S. sourced gross income for independent personal services of nonresident aliens.

  2. The Central Withholding Agreement (CWA) program provides an alternative to IRC §1441 by taking into consideration U.S. sourced income and the estimated expenses directly associated with the U.S. sourced income to determine withholding tax. Withholding is then computed on the net income using graduated withholding rates.

  3. A CWA is an agreement between the Internal Revenue Service, an NRA athlete or entertainer, and a designated withholding agent.

  4. The purpose of the program is to foster compliance and give the NRA athletes and entertainers the opportunity to more accurately reflect their anticipated tax liability by entering into a CWA.  (07-28-2009)
Delegation Order

  1. The authority to enter into a CWA is outlined in SB/SE Delegation Order 4.62.  (07-28-2009)
Revenue Procedure

  1. Rev. Proc. 89-47 establishes the guidelines for the CWA program.  (07-28-2009)
Tax Law

  1. IRC §1441 generally requires all persons having control, receipt, custody, disposal or payment of any items of income that constitute gross income from sources within the United States of any NRA to deduct and withhold from such items of income, a federal tax equal to 30% of their gross income. The income items subject to such 30% withholding include interest, dividends, rent, independent personal service compensation, remunerations and emoluments.

  2. Section 1.1441-4(b)(3) of the Income Tax Regulations provides that the 30% withholding rate imposed on the U.S. sourced independent personal service income of an NRA individual may be reduced to a lower withholding rate if a written agreement to such effect is signed by the Commissioner of Internal Revenue Service or by his or her delegate with such NRA individual and other affected parties. The lower rate is intended to more accurately reflect the NRA’s anticipated federal income tax liability. Liability is computed at graduated rates after allowable expense deductions. The NRA must be in compliance with prior tax years and agree to timely file a U.S. income tax return for the applicable taxable year.  (07-28-2009)
Tax Treaty Provisions Consideration

  1. If the NRA is from a country whose tax treaty with the U.S. exempts 100% of income from all sources, Form 8233,Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, is presented to the withholding agent and submitted to the IRS at least 10 days prior to the event or performance. A CWA is not applicable.

  2. If the NRA is from a country whose tax treaty with the U.S. exempts less than 100% of income from all sources, the tax treaty benefit cannot be claimed during the CWA process. Any applicable tax treaty benefit will be claimed by the NRA when filing the Form 1040NR, U.S. Nonresident Alien Income Tax Return, for the current tax year.  (07-28-2009)

  1. Nonresident alien (NRA): An individual who is not a U.S. citizen or a resident of the United States, i.e. has not qualified for lawful permanent residence (green card) status nor met the substantial presence test.

  2. Withholding agent: Generally, any person or entity that has control, receipt, custody, disposal or payment of any item of income of a foreign person subject to withholding.  (07-28-2009)
Disclosure Authorization

  1. A Form 2848, Power of Attorney and Declaration of Representative , or Form 8821, Tax Information Authorization, must be secured from the NRA before the tax specialist is authorized to discuss tax matters with the designated official(s).

  2. When a Form 2848 or Form 8821 is secured, a copy should be sent or faxed to the campus address found in IRM, Sending Third Party Authorizations to a Campus. The forms should not be sent to the campus if it is a specific purpose authorization as outlined in IRM, Exceptions to Sending Third Party Authorizations to a Campus.  (07-28-2009)
Authority to Execute on Behalf of IRS

  1. Authority to execute a CWA is outlined in Delegation Order Number SB/SE 4.62 (Rev. 1).  (07-28-2009)
Requirements for CWA

  1. In order to qualify for a CWA, the NRA must:

    • Have filed and paid, or made arrangements to pay, prior U.S. taxes due.


      The requirement for a NRA to file tax returns is outlined in 26 CFR §1.6012-1(b).

    • Provide a Disclosure Authorization (Form 2848 or 8821) if the NRA athlete or entertainer wants the IRS to discuss the NRA athlete or entertainer’s tax requirements with his representative and/or provide information to the withholding agent.

    • Request a CWA in writing with the IRS at least 45 days prior the first event or tour date in the U.S. specified in the CWA. Requests received less than 45 days prior to the first event or tour date will be worked as time permits at the discretion of the IRS.  (07-28-2009)
Application for CWA

  1. When an NRA requests a CWA, they must provide an application that includes information document(s) specifying U.S. sourced compensation the NRA will earn and an estimate of the expenses the NRA expects to pay in relation to the U.S. sourced income. The application must also include the following:

    1. The names and addresses of all NRAs to be covered by the agreement.

    2. An itinerary of all dates, locations, and events to be covered by the agreement.

    3. Copies of documents regarding all income streams including but not limited to performance contracts, deals or memos; deal sheets or memos; current recording contracts, deals or memos; sponsoring contracts, deals, or memos; endorsement contracts, deals or memos; merchandising contracts, deals or memos; image and likeness contracts, deals or memos; tour support and reimbursement documents.

    4. A detailed budget of the estimated expenses related to the U.S. sourced income covered in the CWA.

    5. An authorized person to contact in case the IRS needs additional information to process the agreement. If not the NRA see Disclosure Authorization, IRM

    6. The name, address, and employer identification number (EIN) of the proposed withholding agent for the agreement.

  2. The taxpayer or representative should be referred to Form 13930, Instructions on How to Apply for a Central Withholding Agreement, for complete information on the application process.  (07-28-2009)
Appeal Rights

  1. The CWA program is voluntary and there is no appeal process for the NRA for the NRA concerning the CWA application and investigation.

  2. If a request is made to speak to the manager, the specialist will secure the name, phone number, and best time to contact the taxpayer or representative. The specialist will advise management of any taxpayer/representative issues or concerns. Management will then contact the taxpayer or representative.

  3. If the taxpayer requests the phone number for the manager, the specialists will provide the information to the representative and follow the steps in (2) above.

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