How Foreign Athletes and Entertainers Are Taxed Using IRS Form 1042-S

Foreign athletes and entertainers who earn income in the United States follow special tax withholding and reporting rules. Payers use Form 1042-S to report U.S.-source income paid to nonresident aliens and the taxes they withhold.

For example, athletes and entertainers might receive:

• Appearance fees

• Prize winnings

• Sponsorship payments

• Endorsement deals

• Performance earnings at concerts, games, or public events

1. 30% Withholding Tax
The IRS applies a 30% withholding tax on U.S.-source income for foreign individuals. This applies before deducting expenses. However, a reduced treaty rate may apply if the taxpayer is eligible.

2. Central Withholding Agreements (CWA)
Foreign athletes and entertainers can apply for a CWA to lower withholding. In addition, the IRS calculates withholding under a CWA based on estimated net income after expenses. This allows taxes to match actual earnings instead of gross revenue.

3. Tax Treaties
Some countries have tax treaties with the U.S. that reduce withholding or exempt certain income. To claim a reduced rate, the entertainer or athlete must file Form W-8BEN with the withholding agent.

Filing Requirements
Foreign athletes and entertainers must file Form 1040-NR to report U.S. income. They include the income and withholding shown on Form 1042-S. As a result, they may claim a refund if too much tax was withheld.