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State of California Franchise Tax Board

S Corporations — New Withhold at Source Rule for 2009 Form 100S

Purpose of bulletin

To inform staff that for tax years beginning on or after January 1, 2009, S corporations may claim withhold at source on their S corporation return, but not in excess of their tax liability.


In previous years, we allowed S corporations to claim withhold at source credits in excess of their tax liability and receive a refund of the overpayment.

New process

Since S corporations are taxed at the entity level, beginning tax year 2009, they can choose to:

  • Allocate the withholding credit to their S corporation shareholders.
  • Claim the withholding on the S corporation return (not to exceed the amount of tax).
  • Use a combination of both.

S corporations may not receive a refund of withholding on Form 100S, California S Corporation Franchise or Income Tax Return. Any remaining withhold at source credit in excess of the tax liability must be allocated to the S corporation shareholders using Form 592, Quarterly Resident and Nonresident Withholding Statement.

Additional information

Taxpayers can call us at 800.852.5711 or 888.792.4900, Monday through Friday, 8am to 5pm, except state holidays.

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