New IRS Decision Could Keep Foreign Artists At Home

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Due to budget and staffing issues, as of October 1, 2018, the IRS will no longer create Central Withholding Agreements (CWA) with artists making less than $10,000.

Wait, wait, wait, wait..before you click away thinking this fine Arts Hacker post has nothing to do with you, it actually might if you typically host any type of creative artist from other countries. These new regulations will make it more difficult for some artist to decide to work in the U.S.

Central Withholding Agreements make it easier for foreign artists to tour the United States. That is everybody from solo pianists and writers on book tours to the Rolling Stones.

A Central Withholding Agreement is made between an artist, the IRS and a US withholding agent. That withholding agent can be anyone and occasionally it is an arts organization, but will typically be the artist’s agent or a law firm.

Regardless, it can be helpful for arts organizations to understand how these changes influence foreign artists.

Absent a CWA or a tax treaty with their country of residence that says otherwise, an artist earning money in the U.S. would have 30% of every payment withheld.  Imagine trying to tour the US and only getting a check for 2/3 of what you were owed.

A Central Withholding Agreement allows you to submit your tour plan and budget to the IRS and only have the projected actual tax withheld.

So if your taxable income after business expenses is 15%, this is the difference between having 15% withheld now and having 30% withheld now and getting the other 15% back after you file at the end of the year.

While it is all the same in the end, having that CWA set up helps with the cash flow situation while touring.

The $10,000 requirement then impacts smaller musicians the most. A small ensemble may have difficult choices to make about whether they can afford to do a handful of dates in the U.S. without raising their fees.

Also, CWAs are arrangements with individuals, not groups. A musical group might be paid $100,000, but if the front person is making $80,000 and bearing all of the business expenses and the side musician is making $5,000, the front person may only have 10% of earnings withheld while the side musician is having 30%.

Now fortunately, there are a number of things that can count toward that $10,000. If you are only making $5,000 but are receiving a sponsorship  from your home country to tour the US and your airline and hotel costs are being paid by others, all that money and benefits count as taxable toward that $10,000.

For more information about these changes and pretty much any regulations impacting creative artists from other countries looking to work in the United States, check out Artists from Abroad.  They keep abreast of all immigration/visa and tax issues impacting creative artists.

As is often the case with my posting on legal topics, I have to give a nod to Robyn Guilliams from G&G Arts Law who ran a session on this topic at the 2018 Arts Midwest Conference.

Disclaimer: What is a blog post about a legal topic without a disclaimer? This is not legal advice. You should not be getting your legal advice from a blog post. The purpose of this post is to give you things to think about. Speak to a lawyer about specifics.

About Joe Patti

In addition to writing for ArtHacker, I have been writing the blog, Butts in the Seats (buttsseats.com) since 2004.
I am also an evangelist for the effort to Build Public Will For Arts and Culture being helmed by Arts Midwest and the Metropolitan Group. (http://www.creatingconnection.org/about/)
I am currently the Director of the Vern Riffe Center for the Arts at Shawnee State University. Across my career I have worked at University of Hawaii-Leeward Community College, University of Central Florida, Asolo Theater, Utah Shakespearean Festival, Appel Farm Arts and Music Center and numerous other places both defunct and funky.

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