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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
    • Options
    • Bonuses
  • Payee receives California source income that includes, but is not limited to:
    • Cash and noncash distributions
    • Leases
    • Rents
    • Royalties
    • Winnings

Nonresident payees are subject to withholding on California source income regardless of where they live, enter into a contract, or receive payment.

The chart below explains the three phases of withholding; when and how to use the forms, and who is responsible for them.

Phase Forms Tasks
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.

Form 588
Form 588 Instructions

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).
  • Self -Test – Complete the self-test to find out if you are required to withhold on an upcoming payment or distribution

For withholding forms, go to Forms and Publications.

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Last Updated: 09.24.2018


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