For any non-American artist or athlete and their management team, the complexities of working in the United States of America can be daunting. One of the scariest aspects can be the federal and state tax regulations that any non-resident alien (NRA) athlete or artist will have to comply with. Look for a firm that can help you with this.

The biggest tax issue facing any NRA is at the federal level. Without any tax planning all NRA athletes or entertainers will have federal withholding taxes of 30% withheld on gross U.S. earnings. The key is to work to have these taxes recalculated to be based on net earnings projected rather than gross earnings, using the same graduated rates afforded to U.S. citizens and tax residents. Submitting a Central Withholding Agreement (CWA) application can help mitigate the taxes paid up front and help ensure federal taxes paid are more in line with net earnings. The CWA Program has been around since the 1980s, and during that time we’ve seen the policies change many times. For this reason, it's important to work closely with CWA agents to stay current with changes in requirements.

Considerations for the CWA program

The CWA program allows you to submit an application which includes, among other required items, a budget reflecting the anticipated profit or loss. Many athletes or entertainers need assistance to guide them on what is needed and the specific cost categories, as they can be complex. The minimum requirements are that a CWA application must be submitted no later than 45 days before the first U.S. event, and that final accounting must be submitted to the CWA Program no later than 60 days after the last U.S. event.

Enrolling in the CWA program helps with cash flow as it factors in costs that being taxed on the gross does not. Being taxed on budgeted net earnings in the first instance, and then at the final accounting stage, minimizes the risk of having too much tax withheld. While it is possible to get any overpayment of tax refunded, depending on when any U.S. events take place in any calendar year, it may be anywhere from 10 months to 20 months before this refund is physically received. This can be a particular issue for those who do not carry big cash reserves.

Other considerations around CWAs include, but are not limited to:

• Confirming tax compliance to establish that the business entity used or the individual is eligible for such programs.
• Utilize tax treaties where possible, including a review of if the athlete or entertainer will need assistance to mitigate their own tax issues and remain tax compliant.
• Applying for appropriate reduced state tax withholding opportunities where appropriate.
• Assist in reducing Canadian withheld taxes if events take the athlete or entertainer into Canada.
• Do you have good relationships with CWA agents?
• Do you have a clear understanding of UK and U.S. tax laws?
• Vendor relationships, as well as those around the risk of those relationships.
• Assistance with tax mitigation at the state and local levels.

What does CohnReznick think?

Overall, it is recommended that athletes and entertainers review their budgets to see if applying for a CWA could be beneficial. However, we cannot stress enough the importance of staying up to date on all aspects of the CWA and other tax requirements that can impact your events in the U.S. to avoid issues and mitigate risk.

_{Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}