5.24.2  Case Development  (07-28-2009)
Developing Cases

  1. CWA cases are developed from two sources:

    1. Internally - the management assistant will research potential CWA prospects and attach the information to the case for assignment, or

    2. Externally - a request is made by the NRA athlete or entertainer for a CWA by submitting a CWA application.

  2. There are complex relationships that exist between the NRA athlete/entertainer, his agent(s), promoter(s), and the various venues involved in the event. The flow chart below, See Figure 5.24.2-1, shows an example of relationships between the various entities involved in a U.S. tour. For certain athletes, the flow would change in that the promoter is often the withholding agent and some of the steps take other forms.

    Figure 5.24.2-1
    This image is too large to be displayed in the current screen. Please click the link to view the image.  (07-28-2009)
Building a Case File

  1. Each case goes in a separate folder. The file must contain necessary information for the reader to quickly ascertain case status.

  2. The CWA Activity Record, see Exhibit 5.24.2-1, must be updated in a timely manner with any contacts, communication, and time spent on the lead.

  3. Each case file must contain the following documents (if applicable) at a minimum in this order ( see Exhibit 5.24.2-2, CWA Workpaper Index):

    1. CWA Activity Record ( Exhibit 5.24.2-1)

    2. Copy of current CWA

    3. Summary of income, expense, and withholding information for the current year

    4. IDRS Research

    5. All correspondence or documents provided to the IRS by the taxpayer or the taxpayer representative

    6. Copy of letters sent to NRA athlete/entertainer and/or withholding agent(s)  (07-28-2009)
Case Assignment

  1. New case assignments are made by the group manager.

  2. New case assignments sent to the specialist will include available information (IDRS transcripts, artist profile with contact information, historical tours, and upcoming tours).  (07-28-2009)
Inventory Management

  1. In general, assigned cases should be worked on a First In, First Out basis.

  2. A calendaring system should be utilized to ensure follow-up on actions on all open cases.

  3. The CWA Specialists should update their actions on the assignment log and their report grid each time a new action takes place.  (07-28-2009)
Initial Contact with the Taxpayer

  1. Initial contact should be made within 72 hours of case assignment and subsequent progressive contacts should be made as necessary. Tax specialists must document the case history with the reason for any delay.

  2. Contacts with the taxpayer or authorized representative can be made via telephone, fax, and mail.

  3. Sensitive But Unclassified (SBU) and Personally Identifiable Information (PII) may never be sent by electronic mail (email) to taxpayers as outlined in IRM 1.10.3, Standards for Using email. Advise the taxpayers they can send email to us but we cannot guarantee the security of their email.  (07-28-2009)
Use of Email Internally

  1. All SBU and PII information that is emailed must be sent using Secure Messaging as outlined in IRM 1.10.3.

  2. SBU and PII information must not be included in the subject line of encrypted email since the subject line is not encrypted.  (07-28-2009)

  1. The taxpayer must be in compliance with all filing and paying requirements or entered into an installment agreement prior to entering into a CWA.

  2. Check IDRS for past compliance.

  3. If the due date of the tax return has passed and the taxpayer states that an extension has been filed, confirm the filing of the extension by securing a copy of the extension or checking IDRS.


    A Taxpayer Identification Number (TIN) is required in order for an extension to be filed with the Service.  (07-28-2009)
IDRS Research

  1. Tax specialists have access to IDRS. The following command codes will be checked if the NRA has indicated that there is no TIN:

    1. NAMES – searches IMF for SSN using name and optionally, address, birth dates, and/or country. Most effective when used with birth dates.

    2. NAMEI – searched IMF for SSN using last name, first name, zip code (with 000 indicating international).

  2. If the NRA provides a TIN or one is located, the following command codes will be utilized:

    1. INOLES – online entity information that provides the name, address, birth date, filing requirements (MFR = 09 indicates 1040NR filer)

    2. IMFOLI – shows all MFT (master file tax codes) and periods filed (or activity without filing)

    3. IMFOLT – shows specific MFT/Period combo with all transactions

    4. IMFOLR – show one page summary of return information

    5. AMDISA – shows the status and who has control if a MFT/Period has a "-L" freeze and is under exam

    6. RTVUE – full transcription of returns filed for IMF TIN (SSN)

    7. BRTVU – full transcription of returns filed for BMF TIN (EIN)

    8. IRPTRO – list information returns filed and transcribed by year for TIN

    9. SUMRY – provides all years/periods on which any active (e.g. collection or examination status)

    10. TXMOD – provides detail information on a specific tax period which includes collection or examination status information  (07-28-2009)
Analyzing/Verifying Financial Information

  1. Once the tax specialist is assigned a case and an application has been received:

    1. Check the CWA application for accuracy and completeness.

    2. Check IDRS on NRA and related entities for compliance with filing and paying requirements.

    3. Review income and expense information provided.

  2. When reviewing the income information, the specialist should ask the NRA or POA pertinent questions to determine as much as possible about the income and expenses associated with the tour or performance. For example:

    • Is there sponsorship income?

    • Is there merchandising income?

    • Is there endorsement income?

    • Is there tour support income?

    • Are there overages?

    • In addition to tour support, how are shortages in the budget covered?

  3. Only ordinary and necessary business expenses of the NRA related to U.S. sourced personal service income can be used as a deduction from income. When the tour covers both U.S. and non-U.S. income, the specialist must show how allocation of income and expenses was formulated.

  4. The NRA must be in compliance with all filing and paying requirements or entered into an installment agreement. If the NRA has toured in the U.S. in prior tax years, Form 1040NR must be filed and tax paid or covered by an installment agreement.


    The requirement for a NRA to file tax returns is outlined in 26 CFR § 1.6012-1(b).  (07-28-2009)
Travel Expenses

  1. Travel expenses incurred by the NRA when coming to and leaving the U.S are allowed if the expenses are ordinary, necessary, and reasonable for a U.S. tour.  (07-28-2009)
Contingency Expenses

  1. Contingency expenses will not be allowed on the CWA unless history from prior tours indicates that this expense is necessary in order to avoid over-withholding.

  2. Prior to allowing a contingency expense, the withholding agent should attempt to determine which expense categories were under-funded on the prior tour and consider revising the budget to reflect figures that are more accurate.

  3. Contingency expenses will be allowed only after the specialist determines that there is a valid reason for allowing such expense.  (07-28-2009)
Excluded Expenses

  1. The CWA process and application is not an audit. Expenses may be excluded from a CWA, this does not preclude the taxpayer from claiming the expense on the 1040NR.  (07-28-2009)
External Data Sources

  1. Industry information and information about the artist and tour will be reviewed to support information provided by the taxpayer or representative.  (07-28-2009)
Activity Record

  1. The Activity Record, see Exhibit 5.24.2-1, is an important document that records the history and activity for each lead.

  2. The tax specialist must document all contacts, letters, time charged to the case, or any other action taken on the lead so that the activity record can answer any question about the case. The Activity Record should be brief but contain all relevant information.  (07-28-2009)
Compliance Coordination

  1. Coordination with Exam or Collection personnel may be necessary if it is determined that the NRA athlete/entertainer is currently under examination or has ongoing collection activity.

  2. Any request for compliance coordination will be routed through the first level group manager.

  3. Continuation or cessation of activity will be determined once all discussions have been completed.  (07-28-2009)
File Naming Convention

  1. In order to provide a consistent format for the files used in the case file, a file naming convention has been established.

  2. In general, the file name incorporates the CWA ID number, a description of the contents, and other identifying information as desired. For example:

    • 07-222 Checksheet

    • 07-222 L4288 (i.e Letter 4288, No Central Withholding Agreement (CWA) Letter)

    • 07-222 F13920

    • 07-222 Analysis

    • 07-222 CWA B Elm (TP name)  (07-28-2009)
Directed Withholding Letters

  1. Time permitting, Directed Withholding Letters should be issued 30 days prior to the first US tour or event date if a CWA has not been executed with the NRA and the specialist has determined it is in the best interest of the government to issue the letter to the withholding agent (e.g. venues, etc). The Directed Withholding Letter directs the withholding agent to withhold at a rate of 30% of gross income paid to or for the benefit of the NRA for U.S. sourced income.

  2. Many venues, agents, and promoters do not recognize or fully understand their tax withholding requirements under IRC §1441. Therefore, it is critical that the tax specialist identify potential withholding agents and educate them as to their responsibilities.

  3. 30% Directed Withholding Letter may be issued to the venue location(s) directing withholding of 30% of gross income per IRC § 1441 if:

    1. The NRA is non-compliant and ineligible for a CWA, there is no response, or the response is incomplete.

    2. The NRA has not responded to the CWA specialist request.

    3. The NRA has not provided enough information to make a CWA determination 30 days prior to the first U.S. event.  (07-28-2009)
Types of Directed Withholding Letters

  1. Directed Withholding Letter

    1. Letter 4269, Directed Withholding Letter

    2. Letter 4269-A, Directed Withholding Letter Athlete

    3. Letter 4269-B, Directed Withholding Letter Group

    A 30% Directed withholding letter will be issued covering the NRAs of a group when the group is comprised of NRAs and U.S. persons, and the tax specialist has verified that a member or members of a group are U.S. persons.

    Example: A four-person group has one U.S. person. A 30% Directed Withholding letter will be issued to the venue listing only the 3 NRAs and directing that 30% of 75% of settlement be withheld and distributed equally. If verification of different percentages of ownership is subsequently provided, the amount of the directed withholding can be adjusted.

  2. Specific Amount Directed Withholding Letters

    1. Letter 4272, Specific Amount Directed Withholding Letter

    2. Letter 4272-A, Specific Amount Directed Withholding Letter Athlete

    3. Letter 4272-G, Specific Amount Directed Withholding Letter Group

    A specific amount withholding letter is issued to the venue or other withholding agent(s) when we have knowledge that the NRA is an independent contractor, does not share in the profit or loss but receives a fixed amount for the event.

    If L4269 has been issued and the specialist receives information that the NRA does not share in the profit or loss but receives a flat fee, the L4269 will be rescinded and an L4272 will be issued.


    A specific amount directed withholding letter could be issued to the primary artist for backup or support NRA artists.


    The authority to disclose a specific amount of withholding to the withholding agent is based on IRC §6103(a) and IRC §6103(e) .  (07-28-2009)
Delivering Directed Withholding Letters

  1. Letter(s) will be prepared, signed, and faxed and/or mailed by the tax specialist to the contact person at the designated location(s).

  2. Directed Withholding Letters may be faxed to the recipient when time issues warrant fax delivery. All directed withholding letters will be sent as a hardcopy via overnight mail even when a fax copy has been sent. The specialist will track the overnight delivery and place the completed tracking slip in the case file with the directed withholding letter.  (07-28-2009)
Rescinding Directed Withholding Letters

  1. Once a 30% Directed Withholding Letter has been issued and the event date is past, no rescission letter will be issued.

  2. If a CWA is executed and 30% Directed Withholding Letters were previously issued, the CWA supersedes directed withholding letters for any dates after the CWA is signed by all parties.

  3. If a directed withholding letter has been issued and the specialist finds that the individual NRA(s) are not subject to withholding, a rescission letter will be issued.

  4. The manager must approve any request for rescission of 30% Directed Withholding letters.  (07-28-2009)
Requests for CWA after Case Closed (30% Directed Withholding Letter issued)

  1. If the event or tour is complete, no CWA request will be considered.

  2. If the event or tour has not begun, the manager will determine if the CWA is to be worked and by whom.

  3. If the event or tour has begun but the tour is not completed, the manager will determine if the CWA is to be worked and by whom.  (07-28-2009)
Four Walled Rentals

  1. Do not issue Directed Withholding Letters to venues that have a four-wall rental agreement with the NRA.

  2. A venue is considered a four-wall rental only when the facility is rented by the artist or promoter for a performance or event and no other services are provided as part of the rental (e.g. ticket sales, promotion, etc.)

  3. The venue may be a four-wall rental for a specific event. It may also be a non-four-walled for other events.

  4. If the specialist is advised that the venue is a four-wall rental, the specialist should verify the information by checking available resources to determine if the venue is actually a four-wall rental (e.g. does not sell tickets for the event) before taking action on a directed withholding letter issued to the venue.  (07-28-2009)
Special Handling – Letters Issued to Indian Tribal Governments (ITG)

  1. Indian Tribal Governments (ITG) office in the Tax Exempt and Government Entities Operation Division (TE/GE) serves as the gateway for all Service interactions with Tribes and their entities. The ITG office serves as the central point for all Service contacts with Federally recognized Indian tribes. This includes requests for assistance with Central Withholding Agreement matters.

  2. Request by CWA specialist for assistance can be made by contacting the Specialist Referral System or ITG manager found on the ITG website at http://tege.web.irs.gov/templates/TribalHome.asp . The ITG office will assign a specialist to work with the CWA specialist in contacting the Indian tribal government entity.

Exhibit 5.24.2-1  (07-28-2009)
CWA Activity Record

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Exhibit 5.24.2-2  (07-28-2009)
CWA Workpaper Index

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