Canadian Musicians Performing in the United States
Author: Brad Howland
First Posted: June 22, 2008
Revised: June 17, 2003
Artists from Abroad maintains a website devoted to untangling the thorny tax and immigration issues that arise when foreign musicians perform in the United States. Canadian musicians performing in the U.S. should study the site carefully to find out how their income will be taxed. The tax treatment varies depending on whether the musician is performing in the U.S. as an employee or self-employed, and if the musician is performing as an individual, or part of a business or charity.
A person or organization who hires non-employee, Canadian musicians individually to perform in the U.S. is required to act as a withholding agent, deducting 30% from the pay of each Nonresident Alien musician (i.e. not a U.S. citizen or Resident Alien) and remitting it to the IRS. The agent must file Form 1042 with the IRS to report the income and withholdings, and issue 1042-S tax slips to the musicians at the end of the year. Any person or organization who fails to withhold the required amount of tax becomes liable itself to pay that tax to the IRS.
The Nonresident Alien musicians should file 1040NR income tax returns to receive a refund of all or some of the income tax withheld. Those musicians without U.S. identification numbers must apply for Individual Taxpayer Identification Numbers (ITINs) by submitting Form W-7 and applicable identification documents with their 1040NR returns. They can claim foreign tax credits on their Canadian federal and provincial returns for any U.S. tax not refunded.
Exemptions from Withholding
When I first wrote this article in 2008, it was theoretically possible to claim an exemption from withholding using three different methods. The IRS has since tightened up the language since in its publications, making it clear that exemptions will only be allowed when the artist enters into a Central Withholding Agreement (CWA) with the IRS.
The IRS maintains a helpful page on CWAs and updates it frequently – every musician interested in pursuing an exemption should study it thoroughly. For example, the June 7, 2013 version of the page states that "Effective January 1, 2013, requests for a central withholding agreement must be received by the IRS at least 45 days prior to the first event to be covered by the CWA. Requests received with less than 45 days prior to the first event to be covered by the CWA will not be processed and such event(s) will be subject to withholding at 30% of the gross income as is required by IRC 1441."
Payments for performing in the U.S. are often not made directly to the musicians, but instead go to an agent (either U.S. or Canadian), business (if the ensemble is incorporated), or charity (if the ensemble is a Canadian registered charity). Also, musicians may work in the U.S. as an employee, rather than a self-employed person performing independent personal services. In such cases I advise studying the Artists from Abroad site carefully to determine the type and amount of withholding.
Visa Requirements
The best source for visa information is again Artists from Abroad. Many Canadian musicians obtain a P2 Visa for temporary work in the U.S. It can be obtained for a maximum one year period, but is limited to the time period of your actual gigs. P2 Visas can be obtained through your Local of the Canadian Federation of Musicians (CFM). There is an agreement in place between the CFM and the United States Citizenship and Immigration Services (USCIS) that allows the CFM to petition on your behalf, streamlining the process enormously.