California Form 589 - Nonresident Reduced Withholding Request - 2016 Page 2
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32016 Instructions for Form 589
Nonresident Reduced Withholding Request
General Information
Section 1446 Withholding, to the partnership.
of the request and supporting documentation,
The foreign partner must sign and send Form
the FTB will make a determination of how
Form 589, Nonresident Reduced Withholding
589 to the FTB along with a signed copy of
much withholding is appropriate for the
Request, is a request for a reduced withholding
federal Form 8804-C. The FTB will review the
services performed. The FTB will provide
amount and does not guarantee the
request within 21 business days. If the request
a determination letter to the payee and the
nonresident payee a reduction in withholding
is approved, the partnership should remit the
withholding agent with the approved amount
unless approved by the Franchise Tax Board
reduced withholding amount to the FTB along
to be withheld on the payment outlined on
(FTB) prior to the payment for services being
with Form 592-A, Payment Voucher for Foreign
Form 589.
performed.
Partner or Member Withholding.
The withholding agent should retain the
A nonresident taxpayer has the option to
A foreign (non U.S.) partner or member may
determination letter for a minimum of four
use Form 589 to apply for a reduction in the
file a Form 589, to reduce or eliminate a
years and must provide it to the FTB upon
amount to be withheld (see California Revenue
partner’s withholding of California tax on ECTI
request.
and Taxation Code (R&TC) Section 18662).
from California sources, however a foreign
Requirement to File a California Tax Return –
Withholding is optional, at the discretion of
(non-U.S.) partner or member may not file a
A determination letter from the FTB reducing
the withholding agent, on the first $1,500
Form 588, Nonresident Withholding Waiver
withholding does not eliminate the requirement
in payments made during the calendar year.
Request, to request a withholding waiver.
to file a California tax return and pay the tax
Withholding must begin as soon as the total
Form 589 does not apply to payments of
due.
payments of California source income for the
backup withholding. For more information,
You may be assessed a penalty if:
calendar year exceed $1,500.
go to ftb.ca.gov and search for backup
• You do not file a California tax return.
Tax withheld on California source payments
withholding.
• You file your tax return late.
to nonresidents are remitted to the FTB in
Form 589 does not apply to payments for
• The amount of withholding does not satisfy
four payment periods (similar to estimated
wages to employees. Wage withholding is
your tax liability.
tax payments). For more information,
administered by the California Employment
get Form 592, Resident and Nonresident
How to Claim Non-Wage Withholding Credit –
Development Department (EDD). For more
Claim your non-wage withholding credit on one
Withholding Statement.
information, call at 888.745.3886 or go to
of the following:
For California withholding purposes,
edd.ca.gov.
nonresident includes all of the following:
• Form 540, California Resident Income Tax
B When and Where to File
Return
• Individuals who are not residents of
• Form 540NR Long, California Nonresident
California.
The payee must complete and submit
or Part-Year Resident Income Tax Return
• Corporations not qualified through the
Form 589 to the FTB before receiving payment
• Form 541, California Fiduciary Income Tax
Secretary of State to do business in
for services. Failure to submit a timely request
Return
California or having no permanent place of
may result in a 7% withholding requirement.
• Form 100, California Corporation Franchise
business in California.
Online filing – Form 589 can be submitted
or Income Tax Return
• Partnerships or limited liability companies
online. If you file Form 589 online and you
• Form 100S, California S Corporation
(LLCs) with no permanent place of
need to submit additional documentation,
Franchise or Income Tax Return
business in California.
(i.e. federal Form 8804-C, federal Schedule E
• Form 100W, California Corporation
• Any trust without a resident grantor,
(Form 1040), Supplemental Income and Loss
Franchise or Income Tax Return – Water’s
beneficiary, or trustee, or estates where the
expense breakdown, etc.), you must fax the
Edge Filers
decedent was not a California resident.
documentation to us at 916.845.9512. On the
• Form 109, California Exempt Organization
Foreign refers to non-U.S.
fax containing your documentation, you must
Business Income Tax Return
include your name, Taxpayer Identification
Do Not Round Cents to Dollars – On this form,
• Form 565, Partnership Return of Income
Number (TIN), and the confirmation number
do not round cents to the nearest whole dollar.
• Form 568, Limited Liability Company
of your online Form 589 submission. For more
Enter the amounts with dollars and cents as
Return of Income
information, go to ftb.ca.gov and search for
actually withheld.
C Amending Form 589
589 online.
A Purpose
Allow 10 business days for processing
Amended forms can only be filed by the payee.
Form 589 submitted online.
Use Form 589 to request a reduction in the
To amend Form 589:
standard 7% withholding amount that is
Paper filing – Form 589 can be submitted by
• Complete a new Form 589 for the
applicable to California source payments made
mail. Submit requests by mail to:
appropriate year with the correct
to nonresidents.
Submit requests by mail to:
information.
Do not use Form 589 to request a reduced
• Write “Amended” at the top of the amended
WITHHOLDING SERVICES AND
withholding amount if you are a seller of
form.
COMPLIANCE MS F182
California real estate. Sellers should use
• Attach a letter to the back explaining what
FRANCHISE TAX BOARD
Form 593-C, Real Estate Withholding
changes were made and why.
PO BOX 942867
Certificate.
• Do not attach the original Form 589.
SACRAMENTO CA 94267-0651
• Send the amended form and letter to the
A foreign partner may request to reduce or
Allow 21 business days for processing
address listed under General Information B,
eliminate withholding of California tax
Form 589 submitted by mail.
When and Where to File.
on effectively connected taxable income
The FTB may request to review all relevant
(ECTI) from California sources allocable
documentation including, but not limited to,
to a foreign partner (Federal Treasury
receipts and contracts, in order to verify the
Regulation 1.1446-6). The foreign partner
payment and expense amounts. Upon review
must first sign and send federal Form 8804-C,
Certificate of Partner-Level Items to Reduce
Form 589 Instructions 2015 Page 1
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