Below is a brief explanation of some of the forms that concern payments to foreign artists. We also provide an appendix with links to all forms and instructions, or you can find the forms and instructions from the IRS web site.
- Form 8233 – Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual
Form 8233 must be completed by a foreign artist in order to claim an exemption from withholding pursuant to a tax treaty. The artist must also provide either an SSN or ITIN on Form 8233. The artist then submits the form to the U.S. presenter, or U.S. agent or manager (or whoever in the U.S. will be paying the artist.) The U.S. payer must review the form for accuracy and complete Part IV of the Form. For the form to be valid, the U.S. payer must forward completed Form 8233 and its attachments to the IRS within five (5) days of receipt.
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, hotel accommodations, 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 re-filed each year.
- Form W-8BEN – Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding
Form W-8BEN is used by a foreign business both to establish foreign status and beneficial ownership, and to claim income tax treaty benefits. The form is completed by the foreign business and submitted to the U.S. presenter or U.S. manager or agent (anyone who is making a payment to the foreign business). Unlike Form 8233, Form W-8BEN is not submitted to the IRS. The form is retained by the payer, and is presented to the IRS only in the event that the IRS questions why taxes were not withheld by the payer at the time of payment.
- Form W-8EXP – Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding
Form W-8EXP is used by a foreign organization that is tax-exempt in its home country and has either (1) applied for and been granted 501(c)(3) status by the IRS, or (2) obtained an opinion letter from a U.S. attorney concluding that if the organization were to apply for 501(c)(3) status, such status would be granted by the IRS. Unlike Form 8233, Form W-8EXP is not submitted to the IRS. The form is retained by the payer, and is presented to the IRS only in the event that the IRS questions why taxes were not withheld by the payer at the time of payment.
- Form W-8IMY – Certificate of Foreign Intermediary
Form W-8IMY is used if payment is made to a foreign agent or manager for the services of a foreign artist. The form is completed by the foreign agent or manager and submitted to the U.S. payer. (Note that this form would be in addition to the forms required for payments to the foreign artist – e.g., Form 8233, Form W-8BEN, or Form W-8EXP.) Unlike Form 8233, Form W-8IMY is not submitted to the IRS. The form is retained by the payer, and is presented to the IRS only in the event that the IRS questions why taxes were not withheld by the payer at the time of payment.
- Form SS-5 – Application for a Social Security Card
As noted above, an individual foreign artist who wishes to claim an exemption from withholding or taxation by reason of a tax treaty must acquire either a Social Security Number (SSN) or Individual Tax Identification Number (ITIN) as his or her tax identification number. The tax identification number is required to be included on Form 8233 and the artist’s U.S. tax return.
Form SS-5 must be completed and presented by the artist in person at a Social Security Administration office in the U.S. The artist must also bring his or her passport and a copy of the I-94 card (which is available online at www.cbp.gov/I94) as evidence of the artist’s work authorization.
- Form W-7 – Application for IRS Individual Taxpayer Identification Number
If the foreign artist is denied an SSN by the Social Security Administration, he or she may apply for an Individual Tax Identification Number (ITIN) form the IRS. In addition to submitting the completed Form W-7, the artist must also provide a copy of the denial letter from the Social Security Administration to the IRS to obtain an ITIN.
- Form SS-4 – Application for Employer Identification Number
In order to obtain tax treaty benefits, a foreign business must obtain an Employer Identification Number (EIN) from the IRS. As noted above, the EIN is simple to obtain – the form may be submitted to the IRS by fax or by mail.
- Form 1042 – Annual Withholding Tax Return for U.S. Source Income of Foreign Persons
This tax return must be completed by anyone making a payment for the services of a foreign artist (such as a U.S. presenter or a U.S. manager or agent.) The return summarizes the total amount of income paid to foreign artists, as well as all tax withheld, in the aggregate. Form 1042 must be filed regardless of whether any tax was withheld on payments to foreign artists. Forms 1042-S and if appropriate, Form 8233 (required for tax treaty exemptions for individuals), must accompany Form 1042 when it is filed with the IRS. Form 1042 should be filed by March 15 of the year following the calendar year in which the payments were made.
- Form 1042-S – Foreign Person’s U.S. Source Income Subject to Withholding
Form 1042-S is issued by anyone making a payment for the services of that foreign artist, and is similar in purpose to Forms W-2 and 1099 and serves to replace such forms for the reporting of most income paid to foreign artists. If the foreign artist is an independent contractor, the income paid to the performer should be reported on Form 1042-S. A separate Form 1042-S must be filed for each foreign artist to whom or on behalf of whom a payer makes payments. A foreign artist’s taxpayer identification number (SSN or ITIN) is required on Form 1042-S if the artist either seeks credit for the taxes withheld or a tax treaty tax exemption. By March 15 of the year following the calendar year in which the payments were made, the payer must give the foreign artist copies B through D of Form 1042-S, and file Copy A with Form 1042.
- Forms 1040NR and 1040NR-EZ – U.S. Nonresident Alien Income Tax Return
This tax return must be filed by foreign artists who are nonresidents of the U.S. who earn income for services performed in the U.S. The Form 1040NR-EZ is a somewhat simpler return than the 1040NR. However, the EZ form is NOT available to individuals who wish to itemize their deductions or claim tax credits. Therefore, it is not the best form for foreign artists to use if they perform as independent contractors in the U.S. and wish to deduct their ordinary and necessary business expenses from their taxable income.