CA-592: Non-Resident Income Withholding

Non-Resident Income Withholding on CA-592 refers to the process of withholding taxes on income earned by non-residents in California. The CA-592 form is specifically used to report and pay the withheld tax for payments made to non-residents, such as individuals, partnerships, and corporations that do not reside in California but earn income from California sources.

Key Aspects of CA-592

1. Purpose:
   • The CA-592 form is used to report the amount withheld from payments made to non-residents, ensuring that California collects income taxes on income earned within the state.
2. Who Needs to File:
   • Payors, including businesses and individuals, who make payments to non-residents must complete CA-592 if they are required to withhold tax from those payments. This includes payments for services, rents, royalties, and other types of income.
3. Withholding Rate:
   • The withholding rate for non-resident income is typically 7% of the payment amount, although this can vary depending on the type of income and applicable tax laws.
4. Types of Payments Subject to Withholding:
   • Common types of payments that may require withholding include:
     • Compensation for services (e.g., consulting, contract work)
     • Rent
     • Royalties
     • Prizes and awards
     • Sale of California real estate
5. Filing Requirements:
   • The CA-592 must be filed quarterly or annually, depending on the amount of withholding. If total annual withholdings are $500 or more, the form must be filed quarterly.
   • If the withholding is less than $500 for the year, the withholding agent may file annually.
6. Form Structure:
   • The form contains sections to report:
     • The payee’s information (name, address, taxpayer identification number).
     • The amount withheld and payment details.
     • Signature and certification from the withholding agent.
7. Remitting Payment:
   • Along with the CA-592, any withheld amounts must be remitted to the California Franchise Tax Board (FTB). Payments can typically be made electronically or via check, depending on the amount and the method chosen by the payor.

Important Considerations

• Recipient’s Tax Responsibility: Non-residents must report and pay taxes on their California-sourced income when they file their California income tax return, regardless of the withholding.
• Exemptions and Exceptions: Certain payments or recipients may be exempt from withholding, and the payor should review the guidelines to ensure compliance with California tax laws.

Conclusion

CA-592 is an essential form for withholding taxes on payments made to non-residents earning income from California sources. Proper completion and timely submission of the form and remittance of withheld taxes help ensure compliance with state tax regulations and prevent penalties. If you’re unsure about specific situations or requirements, consulting a tax professional or the California Franchise Tax Board can provide additional guidance.