Canadian performers and athletes in the US: tax withholding

Does the US tax Canadian performers, and what does the treaty limit mean?

The US generally taxes a nonresident's US performance income. Article XVI permits US tax when a Canadian treaty resident's annual US gross receipts exceed US$15,000, including expenses reimbursed or paid on the performer's behalf. The limit measures receipts, not profit. Treaty, Article XVI(1)

These rules come from Articles V, VII, XV and XVI of the consolidated treaty. Article XVI covers entertainers whether self-employed or on payroll, so a salaried band, cast or orchestra member faces the same line.

The limit counts receipts from every US engagement in the calendar year, so one low fee does not establish an exemption. This page assumes Canadian treaty residence and US nonresident status; the IRS says to determine residency first. IRS: foreign artists and athletes Enough US days can make you a US tax resident; if the treaty's tie-breaker still treats you as Canadian, Form 1040-NR with Form 8833 claims nonresident status. Form 1040-NR instructions, Dual-resident taxpayer For day counts, see snowbirds and US residency.

What if I play for a team in a league with games in both countries?

An athlete's employment with a team in a league having regularly scheduled games in both countries falls outside Article XVI, as does the team's own income. Treaty, Article XVI(3) Article XV governs instead: pay for work in the US is taxable only in Canada if it is $10,000 or less, or if you are in the US no more than 183 days in any 12-month period beginning or ending in the fiscal year and the pay is not paid by a US resident or borne by a US permanent establishment. Pay from a US-resident team fails the second test. Treaty, Article XV(2) Splitting a season's pay by work location needs a contract and schedule review; see also working across the border.

What counts as US income from an appearance?

US appearance income can include performance fees, endorsements, merchandise sales, royalties and other income closely connected to the event. Looking only at the promoter's fee can miss part of it. IRS: foreign artists and athletes

Separate each revenue stream in the contracts and accounts. An endorsement needs review of what the payment buys and how it relates to US activities. Event-related royalties count with the appearance income; ongoing royalties on songs or recordings are a separate question: see royalties and licence fees from US customers.

How much will the payer withhold, and why on gross pay?

An independent Canadian performer who is a US nonresident generally faces 30% withholding on gross US service pay. The payer generally cannot first subtract your tour costs or decide your final tax from your expected profit. IRS: central withholding agreements

Anyone who controls, receives or pays your fee, such as a promoter or agent, must withhold and is liable for tax it fails to withhold. Form 13930 instructions and 26 U.S.C. 1461 That does not remove your own tax; once you pay it, the IRS does not collect it again from the payer. 26 U.S.C. 1463

Travel and lodging a payer pays or reimburses under a qualifying reimbursement arrangement (an "accountable plan") is generally outside this withholding. Publication 515, Travel expenses It still counts toward the treaty receipts limit. Treaty, Article XVI(1)

Source: Publication 515, Artists and Athletes

Some contractors give the payer Form 8233 to claim a treaty exemption from withholding. The IRS says it typically cannot accept that form for entertainers and athletes, because treaty eligibility may depend on facts known only after year-end. A low expected annual total therefore does not let the promoter pay without withholding. Form 8233 instructions, Public entertainers

Can I reduce withholding before the first event?

A central withholding agreement can base an independent performer's withholding on projected net income at graduated rates. The IRS must receive Form 13930 and its supporting documents at least 45 days before the first itinerary event; it does not process later applications. IRS: agreement application rules

The usual order is the agreement application, then the tax number, then the return. Without an agreement when the payer pays, the payer withholds 30% of gross pay and the performer recovers any excess only by filing Form 1040-NR after year-end. IRS FAQs, question 3

1. Check prior compliance. Required US returns must be filed, and arrangements must be made to pay taxes due.
2. Choose one withholding agent. The agent withholds and deposits the agreed amount, relieving other payers on the covered events. IRS FAQs, question 1 It must be an independent third party, unrelated to you or entities you own, with a US bank account and enrollment in the IRS electronic payment system (EFTPS). Form 13930 instructions and IRS program page
3. Document the full itinerary. Gather event agreements, projected revenue, itemized US expenses, earlier US income and withholding, and sponsorship or merchandise contracts, with US dates and amounts separate from events elsewhere. A tour crossing a calendar year needs a separate agreement for each year.
4. Submit early enough for review. Use the fax or mailing details on the current IRS program page, not the older address in the Form 13930 instructions. The application is signed under penalties of perjury, with Form 2848 or 8821 if a representative applies for you. IRS FAQs, question 3
5. Wait for an effective agreement. You, the agent and the IRS must all sign. A submitted application alone does not authorize reduced withholding, and the agreement covers only its specified events and payments.

An agreement cannot reduce withholding below anticipated tax liability and still requires a timely federal return. IRS program page

Do I need an SSN or ITIN, and can I get one before payment?

You may have no number when you apply for an agreement or when the first payment arrives. The application asks for an SSN or ITIN only if you already have one, so do not wait for one before applying. Form 13930 instructions

The IRS says a performer should apply for an SSN after entering the US, and in general only non-citizens with Department of Homeland Security permission to work can get one. An ITIN is for a person the Social Security Administration (SSA) finds ineligible, and the SSA's denial letter goes with Form W-7. IRS: Central Withholding Agreement program, IRS: foreign artists and athletes and Form W-7 instructions

In the ordinary case, submit Form W-7 with the return, not separately. Identity documents generally must be originals or copies certified by the issuing agency; a certifying acceptance agent, in the US or abroad, can verify originals so you may not need to mail them. Form W-7 instructions, exception tables and Form 8233 instructions

Do I still need a US return if I made no profit or qualify for treaty relief?

A nonresident who performs US personal services is usually engaged in a US trade or business and generally must file Form 1040-NR even with no taxable profit or with treaty-exempt income. Expenses, withholding and an exemption do not by themselves remove the filing requirement. Publication 519, Form 1040-NR instructions and IRS FAQs, question 5 Until a return is filed, the IRS has no time limit to assess any tax due. 26 U.S.C. 6501(c)(3)

For a calendar-year individual, the ordinary filing dates are:

Withholding from an independent tour fee does not make the fee employee wages. Weekend and holiday rules can move the deadline. Form 1040-NR instructions, When and Where Should You File?

Report treaty-exempt income in item L of Schedule OI as the instructions require. If you gave the payer no treaty form, they also require a statement with the information Form 8233 would have asked for. Form 8833, the treaty-position disclosure, is not required for artists' or athletes' income, but its instructions list a claim that business income is not attributable to a US permanent establishment. The sources do not say which governs an Article VII claim, so confirm before filing if you rely on one. Form 1040-NR instructions, Treaty-based return position disclosure and Form 8833

Deductions are generally allowed only on a timely return, generally one filed within 16 months of its due date, and tour costs are the deductions that turn a gross fee into a small profit or a loss. The credit for tax withheld is not affected by that limit. Publication 519, filing deadlines for deductions and credits

My promoter withheld tax: how do I get it back?

If tax was withheld and no agreement was in place, you recover any excess by filing Form 1040-NR after the year ends. IRS FAQs, question 3 The return claims the withholding shown on Form 1042-S, the statement the payer sends with your gross pay and tax withheld. A refund depends on withholding and other payments exceeding the tax calculated on the return. Attach the form to the front of the return; the IRS says these refunds can take up to 6 months. Form 1040-NR instructions Withheld tax counts as paid on the return's original due date, and a late original return generally recovers only tax paid within three years before filing, plus any extension. 26 U.S.C. 6513(b)(3) and 6511(b)(2)(A)

Calculate US income after allowable business deductions, and establish the annual receipts if claiming treaty relief. Reconcile each Form 1042-S to the payer's settlement statements and request corrections for errors in the recipient, gross income or withholding.

Publication 515 uses income code 42 for artist or athlete payments without an agreement and code 43 for payments with one. The code does not itself establish a treaty exemption. Publication 515

A self-employed nonresident owes US self-employment tax only if an international social security agreement puts the work under the US system. Form 1040-NR instructions, Line 4 The Canada–US agreement is covered in Canadian freelancer with US clients, and the broader refund process in US tax withheld on payments to Canadians.

What if my band, company or agent receives the money?

Paying an agent does not remove performance withholding. The IRS applies the obligation to payments made directly or through an agent, manager or representative, and no document overrides it unless a central withholding agreement is in effect. IRS: paying foreign performers

A company's status form, such as a Form W-9 or W-8BEN-E, does not by itself stop withholding. A payer with actual knowledge that a US company receives your fee as your agent must treat it as paid to you; the IRS FAQs, which are not legal authority, say the same where the payer has reason to know. Treas. Reg. 1.1441-1(b)(2)(ii) and IRS FAQs, questions 9 and 10 An agreement is made with an individual, not a company. IRS FAQs, question 5

Article XVI(2) can also permit US tax when performance income accrues to another person. Its exception depends on proving that neither the performer nor related persons participate in that recipient's profits, directly or indirectly. Do not assume incorporation preserves the individual receipts limit. Treaty, Article XVI(2)

Each group member requesting an agreement needs complete individual application information, including backup musicians or singers; one Form 13930 submission can cover several individuals. Form 13930 instructions A Canadian corporation doing business in the US, or claiming a treaty benefit or refund, files its own US return: see Canadian corporation US tax return and, for its payer forms, W-forms for a Canadian corporation.

How does Canada tax the pay, and how much US tax gets a credit?

Canadian residents generally report worldwide income, including US performance earnings. Canada's foreign tax credit uses eligible final US tax, rather than automatically crediting everything the promoter withheld. CRA: Foreign Tax Credit folio

In most cases, the credit for each country is the lesser of the foreign income tax paid and the Canadian tax otherwise payable on your net income from that country. CRA: foreign tax credit

The CRA excludes refunded or refundable tax and withholding above the treaty rate from foreign tax paid, and asks to be notified of a later foreign reassessment that changes the tax paid. Folio S5-F2-C1, paragraphs 1.33, 1.35 and 1.45 To correct a credit after a US refund or change, see foreign tax credit review. For reporting, exchange rates and provincial treatment, see foreign income on a Canadian return.

Do US states tax visiting performers too?

US state tax and withholding require a separate check for each performance location. California, for example, does not follow federal treaty exemptions and requires nonresident individuals to report California-source income on Form 540NR. California FTB: Publication 1017, question 19

California generally requires 7% nonwage withholding once calendar-year California-source payments exceed US$1,500, unless an exemption, waiver or reduction applies. Withholding on the first US$1,500 is generally optional. Form 592 instructions and FTB withholding rules

Obtain Form 592-B for California withholding and reconcile it separately from federal Form 1042-S. A federal withholding agreement does not settle state obligations. Check each state's revenue department for income allocation, withholding relief and return requirements before the itinerary starts. California FTB: nonresident withholding

What should I keep for each date?

Keep records that connect each US appearance to its gross receipts, expenses and withholding. The same records support the agreement application, US return and Canadian credit. Form 13930 and CRA: foreign-tax evidence

• Event date, venue, state and itinerary, with US and Canadian activities separated.
• Signed contracts, payer details and settlement statements, with receipts by type: performance, sponsorship, endorsement, merchandise and event-related royalties.
• Reimbursements, expense invoices, proof of payment and allocation of shared tour costs.
• Member or company allocations showing who earned the income.
• Agreement application, signed agreement, withholding records, SSN or ITIN records, Forms 1042-S, any W-2 and state withholding statements.
• Filed returns, proof of tax payment, refunds and exchange rates used for Canadian reporting.

Gather these records before the agreement application deadline.

Example

A Canadian musician who is a US tax nonresident earns US$20,000 for an independent US tour and has US$15,000 of allowable US business expenses. Assume no other relevant income, reimbursements or expenses paid on the musician's behalf. All figures below are illustrative US dollars.

Without an effective withholding agreement, the promoter generally withholds 30% of US$20,000: US$6,000. The musician's net business income is US$5,000. The gross receipts exceed the treaty's US$15,000 line even though the profit does not.

The musician files Form 1040-NR with Form 1042-S and the supported deductions. If the return establishes final federal tax below US$6,000, the difference is an overpayment that may be refunded. An advance agreement could instead base withholding on projected net income. State taxes and the Canadian return remain separate calculations.

Different for you?

• You have earlier unfiled US returns, a group tour, company receipts or several states: cross-border tax covers the treaty, withholding and filing review.
• You are an athlete on a cross-border league team, or hold a US job that is not performing or competing: see working across the border.
• You invoice US clients for ordinary freelance work: see Canadian freelancer with US clients for contractor filings and status forms.
• Your short US contract is nursing or medical work: see short US contracts for nurses and doctors living in Canada.
• Your Canadian corporation needs a US payer form: see W-forms for a Canadian corporation; a company's form alone does not change withholding on a performer's fee.
• You already received Form 1042-S: see US tax withheld on payments to Canadians.
• You need the Canadian foreign tax credit calculation: see foreign income on a Canadian return.
• You are a US citizen or green card holder: the nonresident rules here do not apply to you; see Americans living in Canada.