Withholding Requirements for Payments to Nonresidents
Use MyFTB to view nonwage withholding credits and electronically submit Form 588, Nonresident Withholding Waiver Request.
Withholding is required when a nonresident payee:
- Provides services in California. Compensation is considered earned where the payee performs the services. Services include:
- Covenant not to compete
- Payee receives California source income that includes, but is not limited to:
- Cash and noncash distributions
Nonresident payees are subject to withholding on California source income regardless of where they live, enter into a contract, or receive payment.
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The chart below explains the three phases of withholding; when and how to use the forms, and who is responsible for them.
|Before payer (withholding agent) makes payment to nonresident payee||Form 590, Withholding Exemption Certificate||Payee who is a California resident or a business with resident status can use Form 590 to certify exemption from nonresident withholding. No withholding required with a valid withholding exemption certificate.|
|Nonresident payee who qualifies can use Form 588 to get a waiver from withholding based generally on California tax filing history. Payer keeps a copy of the determination letter in records. No withholding required with a determination letter.|
|Form 589||Nonresident payee can use a paper or electronic Form 589 to itemize expenses against the California source income. FTB provides payer with a letter stating the reduced withholding amount.|
|Form 587, Nonresident Withholding Allocation Worksheet||Nonresident payee can use Form 587 to allocate California source payments to determine if withholding is required on payments made by payer. Payer keeps a copy of Form 587 in records.|
|At the time payer makes payment to nonresident payee||No FTB forms to use; payers use their own internal processes for withholding.||Payer withholds 7 percent of all California source payments to a nonresident payee that exceed $1,500 in a calendar year, unless payee meets a withholding exemption or qualifies for reduced or waived withholding.|
|After payer makes payment to nonresident payee||Form 592
Form 592 Instructions
|Payer sends FTB a timely Form 592, either electronically or by mail. Form 592 contains a list of all payees withheld upon during the filing period.|
|Form 592-V, Payment Voucher for Resident and Nonresident Withholding||Payer sends FTB a Form 592-V with remittance of withholding and a completed Form 592.|
|Form 592-B, Resident and Nonresident Withholding Tax Statement||By January 31 following the end of calendar year, payer sends each nonresident payee a completed paper or electronic Form 592-B and keeps a copy for records. Nonresident payee claims the withholding by attaching a copy of Form 592-B when filing California tax return. Form 592-B is proof of California source income and withholding.>|
- File Form 540NR, California Nonresident or Part-Year Resident Income Tax Return.
- Attach a copy of Form 592-B to your California resident income tax return. See Form 592-B instructions for more details.
- Enter the amount of withholding on your California resident income tax return, line 73, Withholding (Form 592-B and/or 593).
Should I Withhold on Payments I Make to Others?
- Self -Test – Complete the self-test to find out if you are required to withhold on an upcoming payment or distribution
Exemption and Reduction Forms
- Form 587 – Nonresident Withholding Allocation Worksheet
- Form 588 – Nonresident Withholding Waiver Request
- Form 589 (electronic) – Nonresident Reduced Withholding Request (Use this electronic option for faster request processing.)
- Form 589 – Nonresident Reduced Withholding Request
- Form 590 – Withholding Exemption Certificate
- Form 590-P – Nonresident Withholding Exemption Certificate for Previously Reported Income
- Form 592 – Resident and Nonresident Withholding Statement
- Form 592-A – Payment Voucher for Foreign Partner or Member Withholding
- Form 592-B – Resident and Nonresident Withholding Tax Statement
(This form can be provided to the payee electronically.)
- Form 592-F – Foreign Partner or Member Annual Return
- Form 592-V - Payment Voucher for Resident and Nonresident Withholding
- Electronic Filing Information for Resident, Nonresident, and Real Estate Withholding Agents
- Electronic Funds Transfer (EFT) for Banks and Corporations
- FTB 761RNR – Most Common Errors That Delay Document Processing and Payment Allocation
- FTB 936 – Nonwage Withholding Audit Process
- FTB 1018 – Small Business Withholding Tool
- FTB 1023S – Resident and Nonresident Withholding Electronic Submission Requirements
- FTB 1150 – Withholding at Source Penalty Information
- FTB 1076 – Withholding on Nonresidents With California Source Income
- FTB 4098 – Withholding Information Notice
- FTB 4060 - California's Other Withholding
- FTB 4060 SPANISH - Otros Tipos De Retención En California
- FTB 4827 – Withholding Voluntary Compliance Program Application
- Exhibit A - Withholding Liability Calculation Sample
- YouTube Video: You Could Be a Withholding Agent
- FTB Pub. 923 – SWIFT Guide for Resident, Nonresident, and Real Estate Withholding
- FTB Pub. 1017 – Resident and Nonresident Withholding Guidelines
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