Since January 1, 2008 California payers are required to withhold 7% on payments of “non-wage” compensation to non-residents exceeding $1,500 per calendar year, and remit the amounts withheld quarterly.
Through March 15, 2009, California will consider waiving penalties for failure to file correct information returns if the delinquent returns are prepared and all interest is paid. Payers can remit past-due 2008 withholding as additional compensation to the nonresident. The Franchise Tax Board will also agree not to audit 2007 tax year and prior withholding to program participants.
What Types of Income are Subject to California Withholding?
Payments of over $1,500 annually for:
- Services provided in California by independent contractors
- Rents, Royalties
- Estate and Trust Distributions
Even though no withholding is required of California residents (including entities qualified with the CA Secretary of State to do business in California), payers of California source income should get a completed FTB form 590 “Withholding Exemption Certificate” from the payee.
7% Withholding is required for payments over $1,500 to nonresidents (including entities not qualified with the California Secretary of State to do business in California).
- Payees who are current on California taxes or meet other criteria can submit FTB form 588 “Nonresident Withholding Waiver Request” to request an exemption from withholding.
- Payees can also file FTB form 589 “Nonresident Reduced Withholding Request” to request reduced withholding based on their California income and expenses.
Forms 588 and 589 are due at least 10 days before payment is made.
Amounts withheld are due quarterly –generally on the 15th day of the month after the end of the quarter. More information is available at www.ftb.ca.gov/individuals/wsc/withholding.shtml
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