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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
the treaty country immediately prior to entry into Tax treaties. Certain tax treaties provide a Tax treaties. Under many tax treaties, com-
the United States and who is not a citizen of the limited exemption from U.S. income tax and pensation paid to public entertainers or athletes
United States. The U.S. educational institution from withholding on compensation paid to non- for services performed in the United States is
paying the compensation must report the resident alien students or trainees during train- exempt from U.S. income tax if the artist or ath-
amount of compensation paid each year that is ing in the United States for a limited period. In lete derives receipts for the tax year concerned,
exempt from tax under a tax treaty on Form addition, some treaties provide an exemption including expenses reimbursed to them or
1042-S. See Tax Treaties, later, for information from tax and withholding for compensation paid borne on their behalf, not in excess of $10,000,
about treaty benefits. The employer should also by the U.S. Government or its contractor to a or in more recent treaties, $20,000. See Tax
report the compensation in the state and local nonresident alien student or trainee who is tem- Treaties, later, for information about treaty ben-
wages boxes of Form W-2 if the wages are sub- porarily present in the United States as a partic- efits.
ject to state and local taxes, or in the social se- ipant in a program sponsored by the U.S. Gov- Employees and independent contractors
curity and Medicare wages boxes of Form W-2 ernment. See Tax Treaties, later, for information may claim an exemption from withholding under
if the wages are subject to social security and about treaty benefits. However, a withholding a tax treaty by filing Form 8233. Often, however,
Medicare taxes. agent who is a U.S. resident, a U.S. Govern- you will have to withhold at the statutory rates
Claimants must give you either Form ment agency, or its contractor must report the on the total payments to the entertainer or ath-
W-8BEN or Form 8233, as applicable, to obtain amount of pay on Form 1042-S. lete. This is because the exemption may be
these treaty benefits. Claimants must give you either Form based upon factors that cannot be determined
W-8BEN or Form 8233, as applicable, to obtain until after the end of the year.
Pay during studying and training (Income these treaty benefits.
Code 20). This category refers to pay (as con-
trasted with remittances, allowances, or other Other Income
forms of scholarships or fellowship grants—see Artists and Athletes
Scholarships and Fellowship Grants Subject to (Income Codes 42 and 43) For the discussion of Income Codes 24, 25, and
Chapter 3 Withholding, earlier) for personal 26, see U.S. Real Property Interest, later. For
services performed while a nonresident alien is Because many tax treaties contain a provision the discussion of Income Code 27, see Publicly
temporarily in the United States as a student, for pay to artists and athletes, a separate cate- Traded Partnerships, later.
trainee, or apprentice, or while acquiring techni- gory is assigned these payments for chapter 3
cal, professional, or business experience. withholding purposes. This category includes Gambling winnings (Income Code 28). In
payments made for performances by public en- general, nonresident aliens are subject to chap-
Graduated rates. Wages, salaries, or tertainers (such as theater, motion picture, ra- ter 3 withholding at 30% on the gross proceeds
other compensation paid to a nonresident alien dio, or television artists, or musicians) or ath- from gambling won in the United States if that
student, trainee, or apprentice for labor or per- letes. income is not effectively connected with a U.S.
sonal services performed in the United States trade or business and is not exempted by
are subject to graduated withholding. Use Income Code 42 to report payments to treaty. The tax withheld and winnings are re-
Social security and Medicare tax. A nonresident alien athletes and entertainers portable on Forms 1042 and 1042-S. Chapter 4
nonresident alien temporarily in the United (NRAAEs) who have not signed a central with- withholding does not apply to these proceeds.
States on an “F-1,” “J-1,” “M-1,” or “Q-1” visa is holding agreement (CWA), discussed later. Use No tax is imposed on nonbusiness gambling
not subject to social security and Medicare Income Code 43 to report payments to artists income a nonresident alien wins playing black-
taxes on pay for services performed to carry out and athletes who have signed a CWA. jack, baccarat, craps, roulette, or big-6 wheel in
the purpose for which the alien was admitted to the United States. A Form W-8BEN is not re-
the United States. Social security and Medicare Income Code 42. You must withhold tax at a quired to obtain the exemption from withhold-
taxes should not be withheld or paid on this 30% rate on payments to artists and athletes for ing, but a Form W-8BEN may be required for
amount. This exemption from social security services performed as independent contractors. purposes of Form 1099 reporting and backup
and Medicare taxes also applies to employment See Pay for independent personal services, withholding. Gambling income that is not sub-
performed under Curricular Practical Training earlier, for more information. You must withhold ject to chapter 3 withholding is not subject to re-
and Optional Practical Training, on or off cam- tax at graduated rates on payments to artists porting on Form 1042-S.
pus, by foreign students in “F-1,” “J-1,” “M-1,” or and athletes for services performed as employ- Nonresident aliens are taxed at graduated
“Q” status as long as the employment is author- ees. See Pay for dependent personal services, rates on net gambling income won in the United
ized by the U.S. Citizenship and Immigration earlier, for more information. However, in any States that is effectively connected with a U.S.
Services. situation where the nature of the relationship trade or business.
between the payer of the income and the artist
Example. A nonresident alien is admitted or athlete is not ascertainable, you should with- Tax treaties. Gambling income of resi-
to the United States to study surveying. As part hold at a rate of 30%. dents (as defined by treaty) of the following for-
eign countries is not taxable by the United
of her course, she apprentices to a surveyor. States: Austria, Belgium, Bulgaria, Czech Re-
She also works part-time at a restaurant to sup- Income Code 43. NRAAEs who perform or
plement her income. The wages she earns as participate in events in the United States can re- public, Denmark, Finland, France, Germany,
an apprentice are not subject to social security quest a CWA for a lower rate of withholding. A Hungary, Iceland, Ireland, Italy, Japan, Latvia,
and Medicare taxes. The wages and tips she CWA is an agreement entered into by the ath- Lithuania, Luxembourg, Netherlands, Russia,
earns at the restaurant are subject to social se- lete or entertainer, a designated withholding Slovak Republic, Slovenia, South Africa, Spain,
curity and Medicare taxes. agent, and the IRS. Under no circumstances Sweden, Tunisia, Turkey, Ukraine, and the Uni-
If an alien is considered a resident alien, as will a CWA reduce taxes withheld to less than ted Kingdom.
discussed earlier, that pay is subject to social the anticipated amount of income tax liability. Gambling income of residents of Malta is
taxed at 10%.
security and Medicare taxes even though the We’ve temporarily waived the income re- Claimants must give you a Form W-8BEN
alien is still in one of the nonimmigrant statuses quirement for which form to use when applying (with a U.S. or foreign TIN) to claim treaty bene-
mentioned above. This rule also applies to for a CWA. Form 13930-A is currently unavaila- fits on gambling income that is not effectively
FUTA (unemployment) taxes paid by the em- ble. While the waiver is in effect, individuals with connected with a U.S. trade or business. See
ployer. income below $10,000 can apply for a CWA us- U.S. or Foreign TINs, later, for when you can
Any student who is enrolled and regularly at- ing Form 13930, Instructions on How to Apply accept a Form W-8BEN without a TIN.
tending classes at a school may be exempt for a Central Withholding Agreement PDF. For
from social security, Medicare, and FUTA taxes more information on how to apply for a CWA, Transportation income. U.S. source gross
on pay for services performed for that school. see Form 13930. transportation income (USSGTI), as defined in
See Pub.15. For more information on the CWA program, section 887, is not subject to 30% gross with-
go to IRS.gov/Individuals/International- holding tax, and chapter 4 withholding does not
Taxpayers/Central-Withholding-Agreements. apply to this income. Transportation income is
Page 38 Publication 515 (2023)
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