Rate Increase for Withhold at Source
For taxable years beginning on or after January 1, 2009, the maximum personal income tax rate increases to 9.55 percent.1 For foreign partners or members, the withholding rate is the maximum California tax rate applicable to the partner 9.55 percent. Therefore, the alternative withholding rates for the sale of California real property by S corporations increases to 11.05 percent and 13.05 percent for Financial S corporations.
Taxpayers may be underwithheld due to the increase. However, taxpayers that are underwithheld will not be assessed an underpayment of estimated tax or underpayment of tax penalty to the extent that underpayment was created or increased by the change in the tax rate.
In addition, non-California Partnerships are subject to withholding requirements on a sale of California real property at a rate of 3.33 percent of the sales price or 9.55 percent of the gain.2