Is a non-resident alien from the Czech Republic who receives a 1042-S with $17000 earnings as a golf caddie subject to U S taxes?

[itonewbie · Accepted solution]

Generally yes, unless exempt by treaty.  What are the codes shown on the 1042-S?

Here are some of the questions that need to be raised.  Which country was your client a tax resident of?  What visa was he on?  Was your client in the US supporting his/her countrymen during tournaments in the US?  How many days was he/she present in the US for any purpose during the calendar year or a rolling 12-month period?  Was the legal employer a US or foreign company?  Was the cost of the remuneration borne by a US or foreign company?  If a foreign company, does that company have a PE in the US (this would be a more involving question beyond just the individual)?

[huntgal]

Code on 1042-S  Box 1 income code is 17. Box 2 gross income is 17000. Box 3 Chap.3: is marked x. Box 3a exemption is 04. Box 12a has withholding agent's EIN.  Box 12b Ch.3 status code is 16. Box 12c Ch. 4 status code is 23. He is a resident of Czech Republic. His visa is  U S R01 Nationality Fran. He was in US for 88 days employed by a Pro Golfer.

[itonewbie]

Couple things...
1) Your client filed a F.8233 with Pro Golfer to certify himself as being eligible for treaty exemption under the Independent Personal Services article (of possibly the Czech Republic according to your info above).  It is not uncommon for caddies to be classified as an independent contractor but there have been legal challenges to that position.  I'd re-evaluate the relationship based on facts and languages in the agreement rather than relying solely on that declaration.  Even you mentioned that he was "employed" by a Pro Golfer.
2) You mentioned that your client is on a R-1 visa.  This is a visa for nonimmigration religious workers.  How would your client be on this visa and have earned income as a caddie?
3) Assuming your client was an independent contractor in fact, question remains whether he has a PE in the US as defined in the treaty article, which would expose him to US tax even if his US presence falls within the threshold.
4) You mentioned he is a French national but is claiming treaty benefits as a tax resident of the Czech Republic.  I would examine all the facts carefully based on Article 4 as well as the status of foreign tax filing to determine his eligibility under either treaty.
5) Even in the event the income is exempt under the Independent Personal Services article, a 1042-S was issued, and assuming he not no other US-ECI or FDAP income that would require the filing a return, a 1040NR would, nonetheless, be required for treaty disclosure.
6) Some states (such as CA) do not recognize federal income tax treaties. You'd need to review the state(s) in which he performed services and determine whether income tax return(s) will need to be filed and if taxes would be owed.

Seems like you have a bit more research to do before preparing his US return(s).

[abctax55]

Jensen...you really do not get paid enough for all you do around here.

[itonewbie]

But they already doubled my pay from last year, if that counts for anything... Let me just check my ten-key, $0 x 2... that's still $0, darn! :joy:

[huntgal]

Thank you so much for the information! I would like to refer my client to a NR expert. Do you know if you are available? We are in the Phoenix, AZ area and he will be here May 5-6th.