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State of California Franchise Tax Board

Failure to Withhold Liabilities Due to 589 Noncompliance

Purpose of bulletin

To inform staff of the 100% failure to withhold and remit liabilities that are assessed on withholding agents who are required to withhold per Form 589, Nonresident Reduced Withholding Request.


We require withholding on payments made to California nonresidents with California sourced income. California Revenue and Taxation Code (R&TC) §18662 and 18668 allows us to assess a liability for failure to withhold and remit withholding. A withholding agent who fails to withhold and remit or under-remits withholding is liable for the greater of:

  • The amount actually withheld, plus interest.
  • The amount of taxes due from the nonresident, but not more than the amount required to be withheld, plus interest.

California R&TC §19183 allows us to assess a $100 penalty for each informational form not filed.

A nonresident payee may complete Form 589, Nonresident Reduced Withholding Request, and if approved by us, may be able to reduce their withholding amount. The withholding agent is required to honor the reduced withholding amount on the approved FTB 589.

What’s new?

The Discovery and Compliance Team of the Withholding Services and Compliance Section is currently reviewing cases where a Form 589, Nonresident Reduced Withholding Request, was submitted in 2008 or 2009, and we approved a reduced withholding amount. If the withholding agent did not remit the reduced withholding amount for the vendor or payee, then 100% of the approved reduced withholding amount plus interest will be assessed on the listed withholding agent.

Taxpayer Inquiries

Taxpayers can call our automated line at 888.792.4900, or 916.845.4900 (if outside the United States), Monday through Friday, 8 a.m. to 5 p.m., except state holidays.

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