Central Withholding Agreement Procedures
(Excerpt from IRS Publication 515 "Withholding of Tax on
Nonresident Aliens and Foreign Entities")
Nonresident alien entertainers or athletes performing
or participating in athletic events in the United States, may be able to enter
into a withholding agreement with the IRS for reduced withholding provided
certain requirements are met. Under no circumstances will a withholding
agreement reduce taxes withheld to less than the alien's anticipated income
tax liability.
Nonresident alien entertainers or athletes requesting a central withholding
agreement must provide the following information.
- A list of the names and addresses of the nonresident aliens to be covered
by the agreement.
- Copies of all contracts that the aliens or their agents and
representatives have entered into regarding the time period and performances
or events to be covered by the agreement including, but not limited to,
contracts with:
- Employers, agents, and promoters,
- Exhibition halls,
- Persons providing lodging, transportation, and advertising, and
- Accompanying personnel, such as band members or trainers.
- An itinerary of dates and locations of all events or performances
scheduled during the period to be covered by the agreement.
- A proposed budget containing itemized estimates of all gross income and
expenses for the period covered by the agreement, including any documents to
support these estimates.
- The name, address, and telephone number of the person the IRS should
contact if additional information or documentation is needed.
- The name, address, and employer identification number of the agent or
agents who will be the central withholding agents for the aliens and who
will enter into a contract with the IRS. A central withholding agent
ordinarily receives contract payments, keeps books of account for the aliens
covered by the agreement, and pays expenses (including tax liabilities) for
the aliens during the period covered by the agreement.
When the IRS approves the request, the Associate Chief Counsel
(International) will prepare a withholding agreement. The agreement must be
signed by each withholding agent, each nonresident alien covered by the
agreement, and the Commissioner of the Internal Revenue Service or his delegate.
Generally, each withholding agent must agree to withhold income tax from
payments made to the nonresident alien, to pay over the withheld tax to the IRS
on the dates and in the amounts specified in the agreement, and to have the IRS
apply the payments of withheld tax to the withholding agent's Form 1042 account.
Each withholding agent will be required to file Form 1042 and Form 1042-S for
each tax year in which income is paid to a nonresident alien covered by the
withholding agreement. The IRS will credit the withheld tax payments, posted to
the withholding agent's Form 1042 account, in accordance with the Form 1042-S.
Each nonresident alien covered by the withholding agreement must agree to file
Form 1040NR or, if he or she qualifies, Form 1040NR-EZ.
A request for a central withholding agreement should be sent to the following
address at least 90 days before the agreement is to take effect.