California Form 587 - Nonresident Withholding Allocation Worksheet - 2014 Page 2
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3Instructions for Form 587
Nonresident Withholding Allocation Worksheet
References in these instructions are to the California Revenue and Taxation Code (R&TC).
General Information
in California . Foreign corporations
• Payments made in connection with a
must be qualified to transact intrastate
California performance .
Backup Withholding – With certain limited
business . Use Form 590 .
• Rent paid to nonresidents if the rent is
exceptions, payers that are required to
• The payment is to an estate and the
paid in the course of the withholding
withhold and remit backup withholding
decedent was a California resident . Use
agent’s business .
to the Internal Revenue Service (IRS)
Form 590 .
• Royalties from natural resources
are also required to withhold and remit
paid to nonresidents from business
Form 587 does not apply to payments for
to the Franchise Tax Board (FTB) on
activities in California .
wages to employees . Wage withholding
income sourced to California . The
• Payments of prizes for contests
is administered by the California
California backup withholding rate is 7%
entered in California .
Employment Development Department
of the payment . For California purposes,
• Distributions of California source
(EDD) . For more information, go to
dividends, interests, and any financial
income to nonresident beneficiaries
edd .ca .gov or call 888 .745 .3886 .
institutions release of loan funds made in
from an estate or trust .
the normal course of business are exempt
• Endorsement payments received for
B When to Complete
from backup withholding . For additional
services performed in California .
information on California backup
The withholding agent requests that the
• Other payments of California source
withholding, go to ftb .ca .gov and search
nonresident payee completes, signs,
income made to nonresidents .
for backup withholding .
and returns Form 587 to the withholding
Payments not subject to withholding
If a payee has backup withholding, the
agent when a contract is entered into
include payments:
payee must contact the FTB to provide a
and before a payment is made to the
• To a resident of California or to a
valid Taxpayer Identification Number (TIN)
payee . The withholding agent relies on
corporation, LLC, or partnership, with
before filing a tax return . The following are
the certification made by the payee to
a permanent place of business in
acceptable TINs: social security number
determine the amount of withholding
California .
(SSN); individual taxpayer identification
required, provided the completed and
• To a corporation qualified to do
number (ITIN); federal employer
signed Form 587 is accepted in good faith .
business in California .
identification number (FEIN); California
Form 587 remains valid for the duration
• For sale of goods .
corporation number (CA Corp no .); or
of the contract (or term of payments),
• For income from intangible personal
California Secretary of State (CA SOS)
provided there is no material change in
property, such as interest and
file number . Failure to provide a valid
the facts . By signing Form 587, the payee
dividends, unless the property has
TIN will result in the denial of the backup
agrees to promptly notify the withholding
acquired a business situs in California .
withholding credit .
agent of any changes in the facts .
• For services performed outside
The withholding agent retains Form 587
of California .
A Purpose
for a minimum of four years and must
• To a payee that is a tax-exempt
Use Form 587, Nonresident Withholding
provide it to the FTB upon request .
organization under either California or
Allocation Worksheet, to determine if
federal law, use Form 590 .
withholding is required, and the amount
C Income Subject to
• To a payee that is a government entity .
of California source income subject to
• To reimburse a payee for expenses
Withholding
withholding .
relating to services performed in
California Revenue and Taxation Code
California if the reimbursement is
Withholding is not required if payees are
(R&TC) Section 18662 and the related
separately accounted for and not
residents or have a permanent place of
regulations require withholding of income
subject to federal Form 1099 reporting .
business in California . Get FTB Pub . 1017,
or franchise tax on certain payments made
Corporate payees, for purposes
Resident and Nonresident Withholding
to nonresidents (including individuals,
of this exception, are treated as
Guidelines, for more information .
corporations, partnerships, LLCs, estates,
individual persons .
Do not use Form 587 if any of the
and trusts) for income received from
following applies:
California sources .
D Waivers/Reductions
• You sold California real estate .
Withholding is required if total payments
Use Form 593-C, Real Estate
A nonresident payee may request that
of California source income to the
Withholding Certificate .
withholding be waived . To apply for
nonresident payee during the calendar year
• The payee is a resident of California
a withholding waiver, use Form 588,
exceed $1,500 . The withholding rate is 7%
or is a non-grantor trust that has
Nonresident Withholding Waiver Request .
unless the FTB grants a waiver . See General
at least one California resident
A nonresident taxpayer has the option
Information D, Waivers/Reductions .
trustee . Use Form 590, Withholding
to request a reduction in the amount to
Payments subject to withholding include
Exemption Certificate .
be withheld . To apply for a withholding
• The payee is a corporation, partnership,
the following:
reduction, use Form 589, Nonresident
or limited liability company (LLC) that
• Payments for services performed in
Reduced Withholding Request . FTB does
has a permanent place of business in
California by nonresidents .
not grant reductions or waivers for backup
California or is qualified to do business
withholding .
Form 587 Instructions 2013 Page 1
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