FTM Arts Law is receiving an increasing number of reports from artists, managers, agents and presenters that the Internal Revenue Service is contacting presenters and venues where non-resident foreign artists are scheduled to perform and directing them to withhold 30% of the artists’ gross fee.
The IRS is sending out letters called Directed Withholding Letters (“DWLs”) and they have serious implications. Unless a foreign artist qualifies for an exemption from tax withholding, or enters into a Central Withholding Agreement (“CWA”) with the IRS, then 30% of the artist’s gross fee must be withheld. (Note that not all exemptions from taxation entitle an artist to an exemption from withholding!) Those who represent or present foreign artists in the U.S. and who continue to choose not to address tax issues are taking an enormous risk.
Why is this happening? How is this happening?