Withholding on nonresidents

Withholding on payments to nonresidents and foreign nonresidents (withholding agents)

For taxable years beginning January 1, 2020, a pass-through entity that has paid withholding on behalf of a nonresident owner or has been withheld upon must use Form 592-PTE, Pass-Through Entity Annual Withholding Return. (CCR setion 18662-0 through 18662-6 and 18662-8)

You may need to withhold tax if you make nonwage payments to nonresidents. This is called nonresident withholding.

Payers who withhold tax on nonresidents are called withholding agents. Examples of withholding agents:

  • Promoter
  • Rental property manager
  • Partnership or LLC
  • Estate or trust
  • Venue

When you do not have to withhold on your payee

You may not have to withhold if:

  • Total payments or distributions are $1,500 or less
  • Paying for goods
  • Paying for services performed outside of California

Otherwise, you must withhold 7% of the nonwage payment that’s more than $1,500 in a calendar year.

Visit Publication 1017 for full list of exceptions.

When you have to withhold on your payee

Payments to nonresidents for services performed in California, like:

  • Construction (independent contractors)
  • Installation of software
  • Public speaking

Payments made to nonresident entertainers for performing in California, like:

  • Actors
  • Athletes
  • Singers

Payments made to nonresident like:

  • Rent and lease
  • Royalties

Payments made to pass-through entities like:

  • Partners
  • Members
  • Shareholders
  • Beneficiaries

How to avoid penalties

  • You must pay the withholding by due date to avoid penalties and interest.
  • If you do not withhold, you may have to pay the amount you’re required to withhold, including penalties and interest.

Withholding requirements for a nonresident

Every payment you make nonwage payments you must:

  • Calculate withholding 7% of nonwage payment more than $1,500 in a calendar year
  • Make payments for specific pay periods by each due date of the applicable tax year:
    Payment period Due date
    January 1 through March 31 April 15
    April 1 through May 31 June 15
    June 1 through August 31 September 15
    September 1 through December 31 January 15 (of the next year)
  • Per pay period if applicable:
  • If you made nonwage payments to your PTE owners:
    • Annually, submit Pass-Through Entity Withholding Return (Form 592-PTE)
  • Submit the applicable form to the payee(s):
    • Nonresident Withholding Tax Statement (Form 592-B)

If you have 250 or more payees, visit our Secure Web Internet File Transfer (SWIFT) pages to file the form.

For withholding agents with less than 250 payees mail the form to the following address:

Mail
Withholding Services and Compliance MS F182
Franchise Tax Board
PO Box 942867
Sacramento CA 94267-0651

Withholding requirements for a foreign nonresident

Every payment you make to payees, you must:

  • Make payments for specific pay periods by each due date of the applicable tax year:
    Payment period Due date
    Installment 1 15th day of the 4th month
    Installment 2 15th day of the 6th month
    Installment 3 15th day of the 9th month
    Installment 4 15th day of the 12th month
  • Per pay period if applicable:
    • Submit Payment Voucher for Foreign Partner or Member Withholding (Form 592-A)
  • Annually, you must complete and submit the applicable form to FTB and the payee (s)
  • Submit the applicable form to the payee(s):
    • Nonresident Withholding Tax Statement (Form 592-B)

Nonwage withholding for nonresidents and foreign nonresidents (payee)

If you have taxable nonwage income, your withholding agent may need to prepay tax.

Nonresident income types

Your payer must withhold 7% from your CA source income that exceeds $1,500 in a calendar year.

  • Trust distributions
  • Partnership and LLC distributions
  • Rents
  • Royalties
  • Gambling winnings

Foreign partner or member income types

If you receive income from a partnership or LLC, that income may be subject to withholding

When you file your tax return, you can claim your withholding.

Apply for a withholding reduction or waiver

To request a waiver or reduction, you'll need:

  • Your taxpayer identification number, such as:
    • Social Security Number (SSN)
    • Individual Tax Identification Number (ITIN)
    • Federal Employee Identification Number (FEIN)
    • California Corporation Number (CCN)
  • Income details, including type and amounts

Nonwage withholding waiver

The most common reasons you may qualify:

  • You made an estimate tax payment for this year
  • Have filed returns for the two most current taxable years when you were required to file
  • You are newly admitted shareholder, partner, or member
  • You have no outstanding obligations to FTB

Visit the Instructions for Form 588 for full list of qualifications.

To apply, submit Nonresident Withholding Waiver Request (Form 588):

Online
Through MyFTB
Mail
Withholding Services and Compliance MS F182
Franchise Tax Board
PO Box 942867
Sacramento CA 94267-0651
Fax
916-855-5742

It takes us about 1 month to process your request. If someone applies on your behalf, they must enter their contact details in the requestor field.

You may qualify for an exemption. Complete and certify Form 590 and give to your payer.

Reduction in withholding

To request a reduction based on your operating costs, submit Nonresident Reduced Withholding Request (Form 589). Review the Instructions for Form 589 for more information.

Mail
Withholding Services and Compliance MS F182
Franchise Tax Board
PO Box 942867
Sacramento CA 94267-0651
Fax
916-855-5743

Before you apply, you must enter personal details that match your payer’s records.

After you apply

It takes us about:

  • 2 weeks to process if you applied online
  • 1 month if you applied by mail or fax

Allow 1 week to receive confirmation after we process your request. We may request to view any relevant documents, like receipts or contracts to verify payment amounts.

Reference guide for withholding on nonresidents

Withholding agents are not required to provide forms to their payees.

Always keep a copy of these forms for your records.

Before your withholding agent makes a payment

Use these forms to complete your tasks.
Form Task
Withholding Exemption Certificate (Form 590)
  • Submit Form 590 to your withholding agent
  • Use this form to certify exemption from withholding
  • When certified, no withholding is required
Nonresident Withholding Exemption Certificate for Previously Reported Income (Form 590-P)
  • Partner or member completes and provides to withholding agent as proof of a qualified exemption from withholding for previously reported California source income.
Nonresident Withholding Allocation Worksheet (Form 587)
  • Use Form 587 to allocate California source payments and determine if withholding is required.
Nonresident Withholding Waiver Request (Form 588)
  • Submit Form 588 to apply for a waiver.
  • If we approve the waiver, no withholding is required.
Nonresident Reduced Withholding Request (Form 589)
  • Submit Form 589 to request a reduction in withholding.
  • If we approve the reduced withholding request, our approval letter will state the reduced amount for you to withhold.

When you pay your payee

You may need to:

  • Withhold 7 percent on all California source payments exceeding $1,500 in a calendar year
    • Unless you receive one of the following forms or approval letters:
      • Nonresident Withholding Allocation Worksheet (Form 587)  
      • Nonresident Withholding Waiver Request (Form 588)
      • Nonresident Reduced Withholding Request (Form 589)
      • Withholding Exemption Certificate (Form 590)
      • Nonresident Withholding Exemption Certificate for Previously Reported Income
        (Form 590-P)
  • If backup withholding applies, withhold 7 percent.

After you made a payment

Use these forms to complete your tasks.
Form Task
Resident and Nonresident Withholding Statement (Form 592)
  • Send us a timely Form 592, either electronically or by mail.
  • List all payees withheld upon during the filing period.
  • FTB credits the withholding to the payees’ accounts.
Payment Voucher for Resident and Nonresident Withholding (Form 592-V)
  • Send Form 592-V with a check or money order when you submit the nonresident or backup withholding amount on California source payments to us.
Foreign Partner or Member Annual Return (Form 592-F)
  • Send us a timely Form 592-F, either electronically or by mail.
  • List all payees withheld upon during the filing period.
  • FTB credits the withholding to the payees’ accounts.
Payment Voucher for Foreign Partner or Member Withholding (Form 592-A)
  • Send Form 592-A with a check or money order when you submit the amount of foreign nonresident or backup withholding on California source payments to us.
  • If there is a balance due on Form 592-F, line 8:
    • Detach the Supplemental Payment Voucher from Form 592-A
    • Send with your payment
    • The Supplemental Payment Voucher and payment are due by the original due date of Form 592-F, regardless of extension.
Pass-Through Entity Annual Withholding Return (Form 592PTE)
  • Send us a timely Form 592-PTE, either electronically or by mail.
  • List all payees withheld upon during the filing period.
  • FTB credits the withholding to the payees’ accounts.
Payment Voucher for Foreign Partner or Member Withholding (Form 592 Q)
  • Send Form 592-Q with a check or money order when you submit the amount of pass-through withholding on California source payments to us.
  • If there is a balance due on Form 592-PTE, line 7:
    • Detach the Supplemental Payment Voucher from Form 592-Q
    • Send with your payment
  • The Supplemental Payment Voucher and payment are due by the original due date of Form 592-F, regardless of extension.
Resident and Nonresident Withholding Tax Statement (Form 592-B)
  • Send each payee Form 592-B, and keep a copy for your records.
  • We assess a penalty for failure to file complete, correct, and timely information returns. The penalty is calculated for each payee as follows:
    • $100 for each payee statement not provided by due date.
    • $250 or 10 percent of amount required to be reported (whichever is greater) if failure is due to intentional disregard of the requirement.
    • Visit R&TC Section 19183) for more information.