The issue of the 30% with holding the United States levies against foreign artists doesn’t seem to be going away. Last year I wrote about my victory, with some help from the IRS, in educating my disbursement office about reading tax treaties with other countries. I thought between this new found knowledge and preparing the paperwork well in advance of a performance, most of the problems would be behind us.
Boy was I wrong.
When I returned from the Christmas holidays about two weeks ago, I had a letter from the IRS specifically directing us to withhold 30% from the payment we were making to an artist and then send them proof of having done so. You would think from such a letter that the performers were absconding from the country with huge amounts of cash, but we really aren’t relatively paying them all that much. Especially when you consider their agent gets a cut too. I don’t want to imply that the laws should be applied inconsistently, but it seems like the IRS is either focusing undue attention on small potatoes or they have shifted resources to scrutinize all foreigner artists’ activities. (I still say they would get more bang for their buck going after everyone sheltering money overseas.)
This story has a happy ending, at least for my organization. We received a letter from the IRS today saying the group has entered into an agreement with the IRS and we were specifically directed by name not to withhold the money. Still, the whole incident shows that the IRS is apparently stepping up their activities in this area and you need to be more aware of the laws surrounding withholdings. Artists from Abroad is a good place to start.