Form 8233 - Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual

An arts organization must receive a properly completed Form 8233 (Exemption From Withholding on Compensation for Independent and Certain Dependent^{Footnote 10} Personal Services of a Nonresident Alien Individual) from the individual^{Footnote 11} earning U.S. source personal service income who wishes to avoid withholding on such compensation as a result of a tax treaty between the U.S. and the individual's home country.

Nonresident aliens who wish to be exempt from withholding by reason of tax treaty (Form 8233) must apply for and obtain a taxpayer identification number (generally, a Social Security Number). If a foreign artist does not qualify for a Social Security Number, the individual may use Form W-7 to obtain an individual taxpayer identification number (ITIN). If the payer allows the treaty exemption at the time of payment, but the taxpayer identification number is still not known by the time the payer submits the Form 1042 tax return, the payer must pay the IRS the 30 percent due on the payments with the return.

The individual must file form 8233 with the arts organization whenever the individual knows that he will receive compensation that will be exempt under a tax treaty. The withholding agent is then required to review the form for accuracy and complete Part II. Within five (5) days of receipt, the withholding agent must forward the form and its attachments to:

Internal Revenue Service
International Returns Section
P.O. Box 920
Bensalem, PA 19020-8518

Keep a careful watch on the timing for submitting the Form 8233! The payer should file Form 8233 with the IRS prior to making the first payment. The exemption from withholding is effective for payments made beginning ten days after the form is mailed to the IRS. (Remember that any in-kind payments or third-party payments such as airfare, lodging costs, and other costs are also considered compensation paid to the foreign independent contractor artist.) Form 8233 is valid only for the calendar year in which it is filed and must be refiled each year. If after review of Form 8233, the withholding agent finds the form incomplete or inaccurate, the withholding agent cannot rely on the form and must withhold the full 30 percent NRA Withholding tax.