California Form 589 Draft - Nonresident Reduced Withholding Request

Instructions for Form 589

Nonresident Reduced Withholding Request

General Information

Part I

companies (LLCs) with no permanent place

of business in California, any trust without

What’s New

Vendor/Payee – Enter the identification

a resident grantor, beneficiary, or trustee,

number, name, and address for the vendor/

or estates where the decedent was not a

Beginning January 1, 2008:

payee who will be performing the services.

California resident.

• Domestic nonresidents may request a

• “Foreign” refers to non-U.S.

Part II

reduction in the standard seven percent

When and Where to File

withholding amount that is applicable

Withholding Agent – Enter the withholding

to California source payments made to

agent’s name, identification number, and

The vendor/payee must submit Form 589

nonresidents.

address. The withholding agent is the party

to the FTB before receiving payment for

• Tax withheld on California source payments

that will be providing payment to the vendor/

services. Form 589 is a request for a reduced

to domestic nonresidents is remitted

payee for services performed. Include the

withholding amount and does not guarantee

to the Franchise Tax Board (FTB) on a

Private Mail Box (PMB) in the address field.

the domestic nonresident vendor/payee a

quarterly basis (similar to estimate tax

Write the acronym “PMB” first, then the box

reduction in withholding unless approved by

payments). For more information, see

number. Example: 111 Main Street PMB 123.

the FTB prior to the payment for services being

the new Form 592, Quarterly Nonresident

performed. Please allow 10 business days for

Part III

Withholding Statement.

processing. Submit requests to:

Round Cents To Dollars

Type of Income Subject to Withholding –

WITHHOLDING SERVICES AND

Beginning with the 2007 tax forms, round

Check the box that reflects the type of payment

COMPLIANCE

cents to the nearest whole dollar. For example,

that will be received for services performed on

FRANCHISE TAX BOARD

round $50.50 up to $51 or round $25.49

the date(s) specified.

PO BOX 942867

down to $25. If you do not round, the FTB will

Date(s) of Service – Enter the date(s) the

SACRAMENTO, CA 94267-0651

disregard the cents. This change helps process

services are being performed. The dates of

your returns quickly and accurately.

FAX: (916) 845-9512

service should reflect the same tax year as

In an effort to accommodate requests as timely

Purpose

shown in the upper left corner of Form 589.

as possible, requests for reduced withholding

Line 1 – Enter the total gross California source

California Revenue and Taxation Code

amounts should be faxed to us at least 10

payment the vendor/payee expects to receive

(R&TC) Section 18662 and corresponding

business days prior to payment for the services

for performing services. If the vendor/payee

performed. If requests are received less than

regulations require seven percent to be

and withholding agent have entered into a

10 business days prior to the payment for

withheld on California source payments made

contract for services, this amount should

services performed, seven percent withholding

to nonresidents. However, if a domestic

match the proposed total agreed upon

nonresident taxpayer can show that the

may be required.

payment.

seven percent rate of withholding will result

Processing

Expenses – The vendor/payee should enter

in excessive withholding, the nonresident

any relevant expenses on lines 2-13 that will

may apply for a reduction in the amount to

Upon receipt of the completed and signed

be incurred or paid by the vendor/payee for

be withheld using Form 589, Nonresident

Form 589, the FTB will review the request for

performing the services in California. The

Reduced Withholding Request.

a reduced withholding amount. The FTB may

FTB may verify the expenses by requesting

Do not use Form 589 to request a reduced

request to review all relevant documentation

supporting documentation. Payments the

withholding amount if you are a:

including, but not limited to, receipts and

vendor/payee makes to nonresident third

contracts, in order to verify the payment

• Foreign (non-U.S.) partner or member.

parties may meet the requirements for

and expense amounts. Upon reviewing the

There are no provisions in the California

withholding and remitting seven percent of the

request and supporting documentation, the

R&TC to waive or reduce withholding for

payment to the FTB.

FTB will make a determination of how much

foreign partners or members.

Line 2 – Advertising

withholding is appropriate for the services

• Seller of California real estate. Sellers

Enter any advertising expenses that are

performed. Upon making a determination, the

of California real estate should use

directly related to the date(s) of the services

FTB will provide a notice to the vendor/payee

Form 593-C, Real Estate Withholding

performed.

and the withholding agent with the approved

Certificate.

amount to be withheld on the payment outlined

Line 3 – Commissions and Fees

Form 589 does not apply to payments for

on Form 589. The withholding agent will be

Enter any commissions and fees paid that are

wages to employees. Wage withholding is

instructed to withhold the approved amount

directly related to the date(s) of the services

administered by the California Employment

and remit to the FTB with their next Form 592.

performed.

Development Department (EDD). For more

In addition, the withholding agent will be

Line 4 – Cost of Labor (Contract Labor)

information contact EDD customer service at

instructed to withhold and remit seven percent

Enter the total cost of labor for the date(s) of

(888) 745-3886 or go to their Website at

of any payment made to the vendor/payee in

services performed. Do not include salaries

excess of the gross California source payment

and wages paid to your employees.

For California withholding purposes only, a

amount on reported on Form 589.

Line 5 – Insurance

reference in these instructions to:

Specific Instructions

Enter the premiums paid for business

• “Nonresident” includes individuals who are

insurance related to the date(s) of services

not residents of California, corporations not

Year – Make sure the year in the upper left

performed. Do not enter amounts credited to a

qualified through the California Secretary

corner of Form 589 represents the calendar

reserve for self-insurance or premiums paid for

of State to do business in California or

year for which the services are being

a policy that pays for the lost earnings due to

having no permanent place of business in

performed.

sickness or disability.

California, partnerships or limited liability

Page 2 Form 589 Instructions 2007

California Form 589 Draft - Nonresident Reduced Withholding Request - 2008 Page 3

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