California Form 589 - Nonresident Reduced Withholding Request

Instructions for Form 589

Nonresident Reduced Withholding Request

What’s New

General Information

Form 589 is a request for a reduced

withholding amount and does not guarantee

Amending Form 589

Nonresidents may request a reduction in the

the nonresident payee a reduction in

standard seven percent withholding amount

Amended forms can only be filed by the payee.

withholding unless approved by the FTB prior

that is applicable to California source payments

To amend Form 589:

to the payment for services being performed.

made to nonresidents using Form 589,

• Complete a new Form 589 for the

Online Filing:

Nonresident Reduced Withholding Request.

appropriate year with the correct

Beginning August 29, 2011, you may file

Tax withheld on California source payments

information.

Form 589, online. After this date we will

to nonresidents are remitted to the FTB in

• Write “Amended” at the top of the amended

not be able to process faxed Forms 589. If

four payment periods (similar to estimate

form.

you file Form 589 online and you need to

tax payments). For more information,

• Include a letter explaining what changes

submit additional documentation, (i.e. federal

get Form 592, Resident and Nonresident

were made and why.

Form 8804-C, federal Schedule E (Form 1040),

Withholding Statement.

• Send the amended form and letter to the

expense breakdown, etc.), you must fax the

address listed under General Information B,

Withholding is optional, at the discretion of

documentation to us at 916.845.9512. On the

When and Where to File.

the withholding agent, on the first $1,500

fax containing your documentation, you must

in payments made during the calendar year.

include your name, TIN, and the confirmation

Do Not Round Cents to Dollars – On this form,

Withholding must begin as soon as the total

number of your online Form 589 submission.

do not round cents to the nearest whole dollar.

payments of California source income for the

Enter the amounts with dollars and cents as

Allow 10 business days for processing online

calendar year exceed $1,500.

actually withheld.

filing.

A Purpose

By Mail:

Important Information

Allow 21 business days for processing. Submit

A nonresident taxpayer that can show that the

Beginning on or after January 1, 2010,

requests by mail to:

required seven percent rate of withholding

with certain limited exceptions, payers that

WITHHOLDING SERVICES AND

will result in excessive withholding, should

are required to withhold and remit backup

COMPLIANCE

use Form 589, to apply for a reduction in

withholding to the Internal Revenue Service

FRANCHISE TAX BOARD

the amount to be withheld (see Revenue and

(IRS) are also required to withhold and remit to

PO BOX 942867

Taxation Code (R&TC) Section 18662).

the Franchise Tax Board (FTB). The California

SACRAMENTO CA 94267-0651

backup withholding rate is 7% of the payment.

Do not use Form 589 to request a

In an effort to accommodate requests

For California purposes, dividends, interests,

reduced withholding amount if you are

submitted by mail as timely as possible,

and any financial institution’s release of loan

a seller of California real estate. Sellers

requests for reduced withholding amounts

funds made in the normal course of business

should use Form 593-C, Real Estate

should be received by the FTB at least 21

are exempt from backup withholding. If a

Withholding Certificate.

business days prior to payment for the services

payee has backup withholding, the payee must

A foreign (non U.S.) partner or member may

performed. Failure to submit timely requests

contact the FTB to provide a valid Taxpayer

file a Form 589, to reduce or eliminate a

may result in a seven percent withholding

Identification Number (TIN) before filing a

partner’s withholding of California tax on ECTI

requirement.

tax return. The following are acceptable TINs:

from California sources, however a foreign

Upon receipt of the completed and signed

social security number (SSN); individual

(non-U.S.) partner or member may not request

taxpayer identification number (ITIN); federal

Form 589, the FTB will review the request for

a withholding waiver.

employer identification number (FEIN);

a reduced withholding amount. A signature

Form 589 does not apply to payments subject

is required on Form 589 from the requestor

California corporation number (CA Corp no.);

to backup withholding or for wages to

or payee, in order for the FTB to process.

or California Secretary of State (SOS) file

employees. Wage withholding is administered

number. Failure to provide a valid TIN will

The FTB may request to review all relevant

by the California Employment Development

result in the denial of the backup withholding

documentation including, but not limited to,

Department (EDD). For more information, call

credit. For information, go to ftb.ca.gov and

receipts and contracts, in order to verify the

at 888.745.3886 or go to edd.ca.gov.

payment and expense amounts. Upon reviewing

search for backup withholding.

For California withholding purposes,

the request and supporting documentation, the

Beginning January 1, 2011, we began

nonresident includes all of the following:

FTB will make a determination of how much

applying Federal Treasury Regulation 1.1446-6

withholding is appropriate for the services

• Individuals who are not residents of

procedures to reduce or eliminate withholding

performed. Upon making a determination,

California.

of California tax on effectively connected

the FTB will provide a determination letter

• Corporations not qualified through the

taxable income (ECTI) from California sources

to the payee and the withholding agent

Secretary of State to do business in

allocable to a foreign partner. The foreign

with the approved amount to be withheld

California or having no permanent place of

partner must first sign and send federal

on the payment outlined on Form 589. The

business in California.

Form 8804-C, Certificate of Partner-Level Items

withholding agent will be instructed to withhold

• Partnerships or limited liability companies

to Reduce Section 1446 Withholding, to the

the approved amount, and report that amount

(LLCs) with no permanent place of

partnership. The foreign partner must sign

on their next Form 592. Mail the completed

business in California.

and send Form 589, Nonresident Reduced

Form 592 and Form 592-V, Payment Voucher

• Any trust without a resident grantor,

Withholding Request to the FTB along with

for Resident and Nonresident Withholding,

beneficiary, or trustee, or estates where the

a signed copy of federal Form 8804-C.

with the approved amount. In addition, the

decedent was not a California resident.

The FTB will review the request within 21

withholding agent will be instructed to withhold

business days. If the request is approved,

Foreign refers to non-U.S.

and remit seven percent of any payment made

the partnership should remit the reduced

to the payee in excess of the gross California

B When and Where to File

withholding amount to the FTB along with

source payment amount reported on Form 589.

Form 592-A, Payment Voucher for Foreign

The payee must submit Form 589 to the

The withholding agent retains this form and

Partner or Member Withholding.

FTB before receiving payment for services.

Form 589 Instructions 2012 Page 1

California Form 589 - Nonresident Reduced Withholding Request - 2013 Page 2

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