U.S. Tax Reporting for K-Pop Stars

May 24, 2019

K-pop stars, led by BTS, are expanding actively into the United States. Their U.S. earnings from concerts, television appearances, royalties, and other activities are reportedly substantial. How, then, are their U.S. income taxes handled?

The IRS advises that foreign athletes and entertainers must pay U.S. tax on U.S.-source income earned through activities in the country. Such income includes performance fees, merchandise sales, and royalties.

Special withholding rules generally apply to payments to foreign athletes and entertainers. Compensation for U.S. performances and similar services generally is subject to 30% withholding. For example, if a U.S. concert promoter pays BTS $10,000 for a performance, the promoter must withhold $3,000, or 30%, and remit it to the U.S. government using Form 1042-S. States also often require withholding for performances within their borders, increasing the total amount withheld.

To recover at least some of the withheld tax, the performer files a U.S. nonresident alien return, Form 1040-NR, and reconciles tax on net income after deducting performance expenses. This process may result in a partial refund. However, if U.S. activities become frequent enough that days of presence exceed the residency-test threshold, a resident return, Form 1040, may be required. In that case, income earned in Korea and all other foreign countries may also have to be reported to the U.S. government, so care is needed.