California Form 589 - Nonresident Reduced Withholding Request

2015 Instructions for Form 589

Nonresident Reduced Withholding Request

General Information

1.1446-6). The foreign partner must first sign

The FTB may request to review all relevant

and send federal Form 8804-C, Certificate of

documentation including, but not limited to,

Form 589, Nonresident Reduced Withholding

Partner-Level Items to Reduce Section 1446

receipts and contracts, in order to verify the

Request, is a request for a reduced withholding

Withholding, to the partnership. The foreign

payment and expense amounts. Upon review

amount and does not guarantee the

partner must sign and send Form 589 to

of the request and supporting documentation,

nonresident payee a reduction in withholding

the FTB along with a signed copy of federal

the FTB will make a determination of how

unless approved by the Franchise Tax Board

Form 8804-C. The FTB will review the request

much withholding is appropriate for the

(FTB) prior to the payment for services being

within 21 business days. If the request is

services performed. The FTB will provide

performed.

approved, the partnership should remit the

a determination letter to the payee and the

A nonresident taxpayer has the option to

reduced withholding amount to the FTB along

withholding agent with the approved amount

use Form 589 to apply for a reduction in the

with Form 592-A, Payment Voucher for Foreign

to be withheld on the payment outlined on

amount to be withheld (see California Revenue

Partner or Member Withholding.

Form 589.

and Taxation Code (R&TC) Section 18662).

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

The withholding agent should retain the

Withholding is optional, at the discretion of

file a Form 589, to reduce or eliminate a

determination letter for a minimum of four

the withholding agent, on the first $1,500

partner’s withholding of California tax on ECTI

years and must provide it to the FTB upon

in payments made during the calendar year.

from California sources, however a foreign

request.

Withholding must begin as soon as the total

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

Requirement to File a California Tax Return –

payments of California source income for the

Form 588, Nonresident Withholding Waiver

A determination letter from the FTB reducing

calendar year exceed $1,500.

Request, to request a withholding waiver.

withholding does not eliminate the requirement

Tax withheld on California source payments

Form 589 does not apply to payments of

to file a California tax return and pay the tax

to nonresidents are remitted to the FTB in

backup withholding. For more information on

due.

four payment periods (similar to estimated

California backup withholding, go to ftb.ca.gov

You may be assessed a penalty if:

tax payments). For more information,

and search for backup withholding.

• You do not file a California tax return.

get Form 592, Resident and Nonresident

Form 589 does not apply to payments for

• You file your tax return late.

Withholding Statement.

wages to employees. Wage withholding is

For California withholding purposes,

• The amount of withholding does not satisfy

administered by the California Employment

nonresident includes all of the following:

your tax liability.

Development Department (EDD). For more

information, call at 888.745.3886 or go to edd.

How to Claim Non-Wage Withholding Credit –

• Individuals who are not residents of

ca.gov.

California.

Claim your non-wage withholding credit on one

• Corporations not qualified through the

of the following:

B When and Where to File

Secretary of State to do business in

• Form 540, California Resident Income Tax

California or having no permanent place of

The payee must complete and submit

Return

business in California.

Form 589 to the FTB before receiving payment

• Form 540NR Long, California Nonresident

• Partnerships or limited liability companies

for services. Failure to submit a timely request

or Part-Year Resident Income Tax Return

(LLCs) with no permanent place of

may result in a 7% withholding requirement.

• Form 541, California Fiduciary Income Tax

business in California.

Return

Online filing – Form 589 can be submitted

• Any trust without a resident grantor,

• Form 100, California Corporation Franchise

online. If you file Form 589 online and you

beneficiary, or trustee, or estates where the

or Income Tax Return

need to submit additional documentation,

decedent was not a California resident.

• Form 100S, California S Corporation

(i.e. federal Form 8804-C, federal Schedule E

Foreign refers to non-U.S.

Franchise or Income Tax Return

(Form 1040), Supplemental Income and Loss

• Form 100W, California Corporation

expense breakdown, etc.), you must fax the

Do Not Round Cents to Dollars – On this form,

Franchise or Income Tax Return – Water’s

documentation to us at 916.845.9512. On the

do not round cents to the nearest whole dollar.

Edge Filers

fax containing your documentation, you must

Enter the amounts with dollars and cents as

• Form 109, California Exempt Organization

include your name, Taxpayer Identification

actually withheld.

Business Income Tax Return

Number (TIN), and the confirmation number

A Purpose

• Form 565, Partnership Return of Income

of your online Form 589 submission. For

• Form 568, Limited Liability Company

more information about Form 589 online

Use Form 589 to request a reduction in the

Return of Income

submission, go to ftb.ca.gov and search for

standard 7% withholding amount that is

589 online.

applicable to California source payments made

C Amending Form 589

Allow 10 business days for processing Form

to nonresidents.

Amended forms can only be filed by the payee.

589 submitted online.

Do not use Form 589 to request a reduced

To amend Form 589:

Paper filing – Form 589 can be submitted by

withholding amount if you are a seller of

• Complete a new Form 589 for the

mail. Submit requests by mail to:

California real estate. Sellers should use

appropriate year with the correct

Form 593-C, Real Estate Withholding

Submit requests by mail to:

information.

Certificate.

WITHHOLDING SERVICES AND

• Write “Amended” at the top of the amended

A foreign partner may request to reduce or

COMPLIANCE MS F182

form.

eliminate withholding of California tax on

FRANCHISE TAX BOARD

• Include a letter explaining what changes

effectively connected taxable income (ECTI)

PO BOX 942867

were made and why.

from California sources allocable to a

SACRAMENTO CA 94267-0651

• Send the amended form and letter to the

foreign partner (Federal Treasury Regulation

Allow 21 business days for processing Form

address listed under General Information B,

589 submitted by mail.

When and Where to File.

Form 589 Instructions 2014 Page 1

California Form 589 - Nonresident Reduced Withholding Request - 2015 Page 2

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