Spring 2010 Financial Services Conference Handout 1099 and Entertainer Tax

1. Spring 2010 Financial Services Conference Handout1099 and Entertainer Tax

2. Entertainer Tax • Applies to “nonresident entertainers” who perform in Wisconsin • Total contract price greater than $3,200 • 6% bond or cash deposit, or estimated tax (withholding) • Accumulative total contract price • WT-11 • 1099 Reporting

3. Nonresident Entertainers • A nonresident person (a person who is not a legal resident of Wisconsin) • A foreign corporation, partnership, or other type of entity, not regularly engaged in business in Wisconsin (organized under the laws of either a state other than Wisconsin or a foreign country)

4. Performs in Wisconsin • Derives income from: • Amusement • Entertainment • Public speaking services • Performs in one or more sporting events

5. Total Contract Price • Includes: • Amount Paid in money or cash value of any medium other than cash • Specific amounts paid to the entertainer • Travel expenses • Subcontracted services (i.e. special food requests) • Does not include: • Ordinary and necessary expenses • Building rent • Staging material costs • Utility connections • Etc.

6. Greater than $3,200 • Based on individual • i.e. Group on independent members, not owned by any single member of the group or any other sole proprietor, partnership, or corporation • Total contract price must be determined for each separate independent member

7. 6% Bond or Cash Deposit, or Withholding • Surety Bond – obtained from an insurance or bonding company • Cash Deposit – certified personal check, cashier’s check, postal or bank money order, or cash • Estimated Tax (Withholding) • Can be less than 6% with DOR approval

8. Accumulative Total Contract Price • Accumulative – Subject to withholding at the time the accumulative total contract price exceeds $3,200, and thereafter, during the same year • Example: • January contract $3,000 • July contract $2,000 • Bond, cash deposit, or withholding on $5,000

9. Accumulative Total Contract Price • NOTE: It is the responsibility of the nonresident entertainer or their representative to notify the campus when the accumulative total contract price exceeds $3,200

10. WT-11 • Stage and real name of nonresident entertainer doing business in Wisconsin • Include SSN if individual or EIN for partnership or corporation • No SSN, still required to withhold estimated tax • Will delay “matching” when nonresident tax return is filed • File within 5 days after the performance • Do NOT send a copy to UWSA

12. 1099 Reporting • Enter name of whoever the check is issued to • Likely to be Agent • Agent, acting as nominee/middleman, will in turn, issue 1099 to Nonresident Entertainer less Agent share, also without State Tax Withheld box completed • 1099 equals amount of fee for service • Do not include travel reimbursement accounted to the campus or direct billed from 3rd party vendor • Do not enter WT-11 estimated tax (withheld) amount in State Tax Withheld box 16

13. Entertainer Tax Test Cases

14. 1) Your campus contracts for services of an Entertainer through an agency. The Agency is from another state. Entertainer is a State of Wisconsin resident and an employee of another UW-System institution. Request a W-9 from the agency. Request proof that the entertainer is a WI resident. This is a 1099 reportable payment to the agent, but WT-11 withholding does not apply since the entertainer is a WI resident.

15. 2) Your campus contracts with an agent to hire 3 comedians to perform on campus. The Agency and the Entertainers are from another state. The total contract cost is $4,400. How would you handle this situation with the following circumstances?

16. 2-a) The 3 comedians are all sole proprietors and the fee is split evenly. WT-11 is not required. No estimated tax (withholding). W-9 from agent is required. $4,400.00 reported on 1099 applicable to the Agent.

17. 2-b) The comedians are a partnership and the partnership will receive the entire fee from the agent with no individual split. Entertainer Tax applies. WT-11 is required in the name of the partnership with EIN from partnership. W-9 form is required from the Agent. $4,400.00 reported on a 1099 applicable to the Agent, but the estimated tax (withheld) for entertainer tax is not reported on the 1099.

18. 2-c) The comedians are all sole proprietors but one will receive $3,400 while the other two are paid $500 each. Entertainer Tax applies to the main entertainer. WT-11 is required from the main entertainer with the entertainer’s SSN or EIN. Withhold 6% for the $3,400 portion of payment. W-9 form is required from the Agent. $4,400.00 reported on a 1099 applicable to the Agent but the estimated tax (withheld) for entertainer tax is not reported on the 1099.

19. 3) Your campus contracts for services of an Entertainer through an agency. The Agency is a corporation in Wisconsin. The Entertainer is not a State of Wisconsin resident. • How would you handle this situation if the contract was over $3,200? Request a WT-11 from the Entertainer, and a W-9 from the Agency. Estimated tax (withhold) 6% in absence of a surety bond. Neither Agent nor Entertainer will receive a 1099 because Agent is a corporation.

20. 3-b) Same circumstances but there is no Agent. Payment will be made to the entertainer and the contract is over $3,200? Request a WT-11 and a W-9 from the entertainer. Estimated tax (withhold) 6%. 1099 will be issued to the Entertainer, but withholding for entertainer tax is not reported on the 1099.

21. 4) An entertainer has signed a contract, provided his SSN on a W-9 and completed a WT-11. The payment will be made to the agency.  The check to the agency will be minus 6% state Entertainer tax.  The entertainer brings along sound crew, lighting crew, etc. Entertainer is requesting a variety of soft drinks and specific food requirements in the contract. 

22. 4 ) (continued) Our food service contractor will provide the food but we use account number 3165 (food).  How would you handle this situation where both a service is paid to the agent and food is paid to another vendor for the benefit of the entertainer?

23. From DOR instructions for WT-11: “Total Contract Price” is the amount of consideration indicated in the contract as the price for the nonresident entertainer’s performance, including amounts payable in money or the cash value of any medium other than cash. It also includes any specific amounts to be paid to the nonresident entertainer (for example, amounts to be paid to the nonresident entertainer for travel expenses) or subcontracted services such as lighting, sound, or any other special services or properties required by the nonresident entertainer.

24. For WT-11 entertainer tax calculation, this is interpreted to mean the value of any special considerations or stipulations included in the contract price are subject to the entertainer tax. So if possible, include 6% of the food or other consideration provided in the estimated tax (withhold) calculation. For 1099 reporting, the correct treatment is to not include the cost of food or other consideration paid to another vendor on the 1099 to the agency.