Withholding on nonresidents

Withholding on payments to nonresidents and foreign nonresidents (withholding agent information)

California law requires withholding of tax completed by the person or entity having the control, receipt, custody, disposal, or payment of items of California sourced income or California distribution from nonresidents of California.

Payers who withhold tax on nonresidents are called withholding agents. Examples of withholding agents:

• Promoter
• Rental property manager
• Partnership or LLC
• Estate or trust
• Venue

Withholding agents are required to withhold 7% on payments or distributions to nonresident payees when the total payments or distributions of CA source income exceeds $1,500 for the calendar year.

A nonresident payee is a person or entity that is not a California resident and receives California sourced income or distributions. Examples of nonresident payees include:

• Individuals who are not residents of California.
• Corporations, partnerships or limited liability companies (LLCs) not qualified through the California Secretary of State to do business in California or do not have a permanent place of business in California.
• Any trust without a resident grantor, beneficiary, or trustee.
• Estates where the decedent was not a California resident.

When you do not have to withhold on your payee

Withholding is not required if:

• Total payments or distributions are $1,500 or less
• Paying for goods
• Paying for services performed outside of California

Otherwise, you must withhold 7% of the nonwage payment that’s more than $1,500 in a calendar year.

Visit Publication 1017 for full list of exceptions.

When you must withhold on your payee

Payments to nonresidents for services performed in California, like:

• Construction (independent contractors)
• Installation of software
• Public speaking

Payments made to nonresident entertainers for performing in California, like:

• Actors
• Athletes
• Singers

Payments made to nonresident like:

• Rent and lease
• Royalties

Distributions made to pass-through entities like:

• Partners
• Members
• Shareholders
• Beneficiaries

Withholding requirements for a nonresident

For every nonwage payment you make, you must:

• Calculate and withhold 7% of nonwage payment more than $1,500 in a calendar year
• Make payments of tax withheld by the specific due date for each payment period:

  Payment period	Due date
  January 1 through March 31	April 15
  April 1 through May 31	June 15
  June 1 through August 31	September 15
  September 1 through December 31	January 15 (of the next year)

• Per pay period if applicable:
  • Submit Resident and Nonresident Withholding Statement (Form 592) with Payment Voucher for Resident and Nonresident Withholding (Form 592-V)
  • Submit payment voucher for Pass-Through Entity Withholding (Form 592-Q)
• If you made nonwage payments to your PTE owners:
  • Annually, submit Pass-Through Entity Withholding Return (Form 592-PTE)
• Submit the applicable form to the payee(s):
  • Nonresident Withholding Tax Statement (Form 592-B)

For withholding agents with less than 250 payees mail the form and payment to the following address:

Mail

Withholding Services and Compliance MS F182
Franchise Tax Board
PO Box 942867
Sacramento CA 94267-0651

Withholding requirements for a foreign nonresident

Every payment you make to payees, you must:

• Submit the tax withheld by the specific due date for each period of tax withheld:

  Payment period	Due date
  Installment 1	15th day of the 4th month
  Installment 2	15th day of the 6th month
  Installment 3	15th day of the 9th month
  Installment 4	15th day of the 12th month

• Per pay period if applicable:
  • Submit Payment Voucher for Foreign Partner or Member Withholding (Form 592-A),
• Annually, you must complete and submit the applicable form to FTB and the payee (s)
  • Submit Foreign Partner or Member Annual Return (Form 592-F) with Form 592-A, if applicable
• Submit the applicable form to the payee(s):
  • Nonresident Withholding Tax Statement (Form 592-B)

How to avoid penalties

• You must pay the withholding by due date to avoid penalties and interest.
• If you do not withhold, you may have to pay the amount you’re required to withhold, including penalties and interest.

If you are assessed penalties and interest and disagree with the assessment, you may pay the balance due and file a claim for refund. For more information visit Claim for refund.

Nonwage withholding for nonresidents and foreign nonresidents (payee information)

If you have taxable nonwage income, your withholding agent may need to withhold and send tax to us on your behalf.

Nonresident income types

Your payer must withhold 7% from your CA source income that exceeds $1,500 in a calendar year.

• Trust distributions
• Partnership and LLC distributions
• Rents
• Royalties
• Gambling winnings

Foreign partner or member income types

If you receive income from a partnership or LLC, that income may be subject to withholding

When you file your tax return, you can claim your withholding.

Apply for a withholding reduction or waiver

To request a waiver or reduction, you'll need:

• Your taxpayer identification number, such as:
  • Social Security Number (SSN)
  • Individual Tax Identification Number (ITIN)
  • Federal Employee Identification Number (FEIN)
  • California Corporation Number (CCN)
• Income details, including type and amounts

Nonwage withholding waiver

The most common reasons you may qualify:

• You made an estimate tax payment for this year
• Have filed returns for the two most current taxable years when you were required to file
• You are newly admitted shareholder, partner, or member
• You have no outstanding obligations to FTB

Visit the Instructions for Form 588 for full list of qualifications.

To apply, submit Nonresident Withholding Waive Request (Form 588):

Online

Through MyFTB

Mail

Withholding Services and Compliance MS F182
Franchise Tax Board
PO Box 942867
Sacramento CA 94267-0651

Fax

916-855-5742

Withholding Exemption Certificate

You may qualify for an exemption. Complete and certify Form 590 and give to your payer.

Reduction in withholding

To request a reduction based on your operating costs, submit Nonresident Reduced Withholding Request (Form 589) online or by mail. Review the Instructions for Form 589 for more information.

Online

Form 589 Nonresident Reduced Withholding Request (Online Submission)

Mail

Withholding Services and Compliance MS F182
Franchise Tax Board
PO Box 942867
Sacramento CA 94267-0651

Fax

916-855-5743

Before you apply, you must enter personal details that match your payer’s records.

After you apply

It takes us about:

• 2 weeks to process if you applied online
• 1 month if you applied by mail or fax

Allow 1 week to receive confirmation after we process your request. We may request to view any relevant documents, like receipts or contracts to verify payment amounts.

Reference guide for withholding on nonresidents

Withholding agents are not required to provide withholding waiver and reduced withholding request forms to their payees.

Payees should review these forms and tasks before their withholding agent makes a payment.

Form	Task
Withholding Exemption Certificate (Form 590)	Submit Form 590 to your withholding agent Use this form to certify exemption from withholding When certified, no withholding is required
Nonresident Withholding Exemption Certificate for Previously Reported Income (Form 590-P)	Partner or member completes and provides to withholding agent as proof of a qualified exemption from withholding for previously reported California source income.
Nonresident Withholding Allocation Worksheet (Form 587)	Use Form 587 to allocate California source payments and determine if withholding is required.
Nonresident Withholding Waiver Request (Form 588)	Submit Form 588 to apply for a waiver. If we approve the waiver, no withholding is required.
Nonresident Reduced Withholding Request (Form 589)	Submit Form 589 to request a reduction in withholding. If we approve the reduced withholding request, our approval letter will state the reduced amount for you to withhold.

When a withholding agent pays their payee

A withholding agent may need to:

• Withhold 7 percent on all California source payments exceeding $1,500 in a calendar year
  • Unless you receive one of the following forms or approval letters:
    • Nonresident Withholding Allocation Worksheet (Form 587)
    • Nonresident Withholding Waiver Request (Form 588)
    • Nonresident Reduced Withholding Request (Form 589)
    • Withholding Exemption Certificate (Form 590)
    • Nonresident Withholding Exemption Certificate for Previously Reported Income (Form 590-P)
• If backup withholding applies, withhold 7 percent.

After the withholding agent makes a payment

The withholding agent must use the following forms to complete their tasks.

Form	Task
Resident and Nonresident Withholding Statement (Form 592)	Send us a timely Form 592, either electronically or by mail. List all payees withheld upon during the filing period. FTB credits the withholding to the payees’ accounts. We assess a penalty for failure to file complete, correct, and timely information returns. The penalty is calculated per payee as follows: $40 if filed 1 to 30 days after due date. $80 if filed 31 days to 6 months after due date. $130 if filed more than 6 months after due date. $330 or 10 percent of amount required to be reported (whichever is greater) if failure is due to intentional disregard of the requirement. (R&TC Section 19183)
Payment Voucher for Resident and Nonresident Withholding (Form 592-V)	Send Form 592-V with a check or money order when you submit the nonresident or backup withholding amount on California source payments to us.
Foreign Partner or Member Annual Return (Form 592-F)	Send us a timely Form 592-F, either electronically or by mail. List all payees withheld upon during the filing period. FTB credits the withholding to the payees’ accounts.
Payment Voucher for Foreign Partner or Member Withholding (Form 592-A)	Send Form 592-A with a check or money order when you submit the amount of foreign nonresident or backup withholding on California source payments to us. If there is a balance due on Form 592-F, line 8: Detach the Supplemental Payment Voucher from Form 592-A Send with your payment The Supplemental Payment Voucher and payment are due by the original due date of Form 592-F, regardless of extension.
Pass-Through Entity Annual Withholding Return (Form 592PTE)	Send us a timely Form 592-PTE, either electronically or by mail. List all payees withheld upon during the filing period. FTB credits the withholding to the payees’ accounts.
Payment Voucher for Foreign Partner or Member Withholding (Form 592 Q)	Send Form 592-Q with a check or money order when you submit the amount of pass-through withholding on California source payments to us. If there is a balance due on Form 592-PTE, line 7: Detach the Supplemental Payment Voucher from Form 592-Q Send with your payment The Supplemental Payment Voucher and payment are due by the original due date of Form 592-F, regardless of extension.
Resident and Nonresident Withholding Tax Statement (Form 592-B)	Send each payee Form 592-B, and keep a copy for your records. We assess a penalty for failure to file complete, correct, and timely information returns. The penalty is calculated for each payee as follows: Up to $270 for each payee statement not provided by due date. $550 or 10 percent of amount required to be reported (whichever is greater) if failure is due to intentional disregard of the requirement. (R&TC Section 19183)