So what is common between CPAs and Neil Armstrong?

Besides the turbulent journey both encounter in their lives, what is common between the astronaut and a CPA? Explains Alex Malley, the head of the Australian Certified Practicing Accountants, “I know something not a lot of people know about Neil Armstrong—his dad was an auditor”, The institute in recent past conferred upon the first moonwalker an honorary CPA Australia membership. Welcome, Mr. Armstrong – you are in great company!

In a rare interview, astronaut Neil Armstrong talked about the space program, his walk on the moon, and the fate of NASA.

Here are the glimpses of his interview with Mr. Malley –

IRS planning more enforcements for NRA athletes, entertainers and foreign government employees

Nonresident alien (NRA) athletes and entertainers performing independent personal services or participating in the U.S. and embassy and consulate employees in the U.S. can expect more enforcement and litigation, an IRS official said May 12.

Speaking at the American Bar Association Tax Section meeting in Washington, Lindsey D. Stellwagen, Special Counsel International, Office of Chief Counsel said that although there had been a lot of publicity on IRS measures to enforce compliance on U.S. persons  with offshore wealth, her agency is also stepping up enforcement of NRAs and resident aliens (e.g. green card holders) that owe U.S. tax. She discussed the IRS programs pertaining to athletes and entertainers and the embassy project.

Foreign athletes and entertainers may pose a challenge to IRS enforcement because they come into the U.S. for a brief period of time, earn a lot of money, then leave. Such persons may be able to evade paying tax on  their U.S.-source income and enforcement may be futile if they money earned has exited the U.S. without the imposition of withholding at source.

Nonresident alien entertainers or athletes performing independent personal services or participating in athletic events in the U.S. are generally subject to a 30 percent withholding on gross income. Stellwagen explained that under the central withholding  agreement (CWA) program, such persons may be subject to reduced withholding provided that certain requirements are satisfied. The agreement is entered into by the NRA athlete or entertainer, a withholding agent and the IRS and is valid for a specific tour  or series of events. Withholding is based upon the budget provided and estimated net profits.

CPA Global Tax & Accounting PLLC can assist athletes and entertainers with the CWA program and work with the IRS to minimize the exposures.

Can the tax treaty apply to a US permanent resident working in US as a foreign government employee?

In a legal advice, the IRS Office of Chief Counsel has concluded that compensation paid to a U.S. permanent resident employed by a foreign government is not exempt from tax under the Belgium-U.S. income tax treaty.

The facts provide that a taxpayer lives and works in the U.S. as an employee of Belgium. The taxpayer, although not a U.S. citizen, is a lawful permanent resident (i.e. a green card holder).

In general, U.S. income tax treaties contain a “savings clause” that provides that a treaty will not affect the taxation by the U.S. of its residents and citizens (see e.g. Article 1(4) of U.S. Model  Income Tax treaty.) An exception to the savings clause is provided for in almost all income tax treaties, but it is not extended to persons who are permanent residents or citizens of the U.S. (permanent residents are treated as U.S. residents under Code Sec.  7701(b)(1)(A)(i)).

The memo notes that Rev Ruling 75-425 has given rise to some confusion with respect to employees of Belgium as it provided that income under the 1948 Belgium-U.S. income tax treaty exempted from tax  the compensation paid to employees who were citizens of the employing country. Prior to the publication of the ruling, however, the new 1970 income tax treaty between both countries was signed and did  not exempt such income from taxation. Rev Rul 75-425 was not updated, but was subsequently obsoleted by Rev Ruling 2007-60.