CWA Central Withholding

IRS issues new version of Central Withholding Agreement form

Mike Habib, EA

The IRS has issued a June 2008 version of Form 13930, Application for Central Withholding Agreement.

Under IRC §1441(a), nonresident alien (NRA) individuals are subject to 30% withholding on the gross amount of interest, dividends, rent, salaries, wages, compensations, remunerations, and emoluments they receive from sources within the United States. However, under a central withholding agreement (CWA), withholding is computed on estimated net income rather than gross income, and at graduated tax rates afforded to U.S. resident aliens and U.S. citizens rather than at a 30% tax rate. The IRS will consider entering into a CWA with a nonresident entertainer or athlete if all of the requirements in Rev Proc 89-47, 1989-2 CB 598, are met.

An authorized representative may apply for a CWA on a nonresident entertainer’s or athlete’s behalf. The IRS accepts Form 2848, Power of Attorney and Declaration of Representative, and Form 8821, Tax Information Authorization. Requests for a CWA must be submitted at least 45 days before the tour begins, or the event occurs, to give the IRS enough time to evaluate the application. The form instructions note that the agreement is only effective for the tour or events covered in the CWA, and payments stipulated in the CWA. The agreement must be signed by all parties in the CWA (i.e., the NRA, withholding agent, and the IRS). The CWA program requires withholding agents to be enrolled in the Electronic Federal Tax Payment System (EFTPS) and requires deposits to be made through EFTPS. Form 13930 is on the IRS website at https://www.irs.gov/pub/irs-pdf/f13930.pdf.

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