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Instructions for Form 590
<br />Withholding Exemption Certificate
<br />References in these instructions are to the California Revenue and Taxation Code (R &TC).
<br />tVnai-s new
<br />Backup Withholding – Beginning on or
<br />after January 1, 2010, with certain limited
<br />exceptions, payers that are required to
<br />withhold and remit backup withholding to
<br />the Internal Revenue Service (IRS) are also
<br />required to withhold and remit to the Franchise
<br />Tax Board (FTB). The California backup
<br />withholding rate is 7% of the payment. For
<br />California purposes, dividends, interests,
<br />and any financial institutions release of loan
<br />funds made in the normal course of business
<br />are exempt from backup withholding. For
<br />additional information on California backup
<br />withholding. go to ftb.ca.gov and search for
<br />backup withholding.
<br />If a payee has backup withholding, the payee
<br />must contact the FTB to provide a valid
<br />Taxpayer Identification Number (TIN) before
<br />filing a tax return. The following are acceptable
<br />TINs: social security number (SSN); individual
<br />taxpayer identification number (ITIN); federal
<br />employer identification number (FEIN);
<br />California corporation number (CA Corp
<br />No.); or Secretary of State (SOS) file number.
<br />Failure to provide a valid TIN will result in the
<br />denial of the backup withholding credit. For
<br />more information go to ftb.ca.gov and search
<br />for backup withholding.
<br />General Information
<br />For purposes of California income tax,
<br />references to a spouse, husband, or wife
<br />also refer to a Registered Domestic Partner
<br />(RDP) unless otherwise specified. For more
<br />information on RDPs, get FTB Pub. 737, Tax
<br />Information for Registered Domestic Partners.
<br />Private Mail Box (PMB) – Include the PMB
<br />in the address field. Write "PMB" first, then
<br />the box number. Example: 111 Main Street
<br />PMB 123.
<br />Foreign Address – Enter the information in
<br />the following order: City, Country, Province/
<br />Region, and Postal Code. Follow the country's
<br />practice for entering the postal code. Do not
<br />abbreviate the country's name.
<br />A Purpose
<br />Use Form 590, Withholding Exemption
<br />Certificate, to certify an exemption from
<br />nonresident withholding. California residents or
<br />entities should complete and present Form 590
<br />to the withholding agent. The withholding agent
<br />is then relieved of the withholding requirements
<br />if the agent relies in good faith on a completed
<br />and signed Form 590 unless told by the FTB
<br />that the form should not be relied upon.
<br />The following are excluded from withholding
<br />and completing this form:
<br />• The United States and any of its agencies or
<br />instrumentalities
<br />• A state, a possession of the United States,
<br />the District of Columbia, or any of its
<br />political subdivisions or instrumentalities
<br />• A foreign government or any of its political
<br />subdivisions, agencies, or instrumentalities
<br />Important –This form cannot be used
<br />for exemption from wage and real estate
<br />withholding.
<br />• If you are an employee, any wage
<br />withholding questions should be directed
<br />to the FTB General Information number,
<br />800.852.5711. Employers should call
<br />888.745.3886 or go to www.edd.ca.gov.
<br />• Sellers of California real estate use
<br />Form 593 -C, Real Estate Withholding
<br />Certificate, to claim an exemption from real
<br />estate withholding.
<br />B Requirement
<br />R &TC Section 18662 requires withholding
<br />of income or franchise tax on payments of
<br />California source income made to nonresidents
<br />of California.
<br />Withholding is required on the following, but is
<br />not limited to:
<br />• Payments to nonresidents for services
<br />rendered in California.
<br />• Distributions of California source income
<br />made to domestic nonresident S corporation
<br />shareholders, partners and members and
<br />allocations of California source income made
<br />to foreign partners and members.
<br />• Payments to nonresidents for rents if the
<br />payments are made in the course of the
<br />withholding agent's business.
<br />• Payments to nonresidents for royalties with
<br />activities in California.
<br />• Distributions of California source income to
<br />nonresident beneficiaries from an estate or
<br />trust.
<br />• Prizes and winnings received by
<br />nonresidents for contests in California.
<br />However, withholding is optional if the total
<br />payments of California source income are
<br />$1,500 or less during the calendar year.
<br />For more information on withholding get
<br />FTB Pub. 1017, Resident and Nonresident
<br />Withholding Guidelines. To get a withholding
<br />publication see General Information H,
<br />Publications, Forms, and Additional
<br />Information.
<br />C Who Certifies this Form
<br />Form 590 is certified by the payee. An
<br />incomplete certificate is invalid and the
<br />withholding agent should not accept it. If the
<br />withholding agent receives an incomplete
<br />certificate, the withholding agent is required
<br />withhold tax on payments made to the payee
<br />until a valid certificate is received. In lieu of a
<br />completed certificate on the preprinted form, the
<br />withholding agent may accept as a substitute
<br />certificate a letter from the payee explaining
<br />why the payee is not subject to withholding. The
<br />letter must contain all the information required
<br />on the certificate in similar language, including
<br />the under penalty of perjury statement and the
<br />payee's taxpayer identification number. The
<br />withholding agent must retain a copy of the
<br />certificate or substitute for at least four years
<br />after the last payment to which the certificate
<br />applies, and provide it upon request to the
<br />Franchise Tax Board.
<br />For example, if an entertainer (or the
<br />entertainer's business entity) is paid for a
<br />performance, the entertainer's information
<br />must be provided. Do not submit the
<br />entertainer's agent or promoter information.
<br />The grantor of a grantor trust shall be treated
<br />as the payee for withholding purposes.
<br />Therefore, if the payee is a grantor trust and
<br />one or more of the grantors is a nonresident,
<br />withholding is required. If all of the grantors
<br />on the trust are residents, no withholding
<br />is required. Resident grantors can check
<br />the box on Form 590 labeled "Individuals
<br />—Certification of Residency."
<br />D Who is a Resident
<br />A California resident is any individual who
<br />is in California for other than a temporary or
<br />transitory purpose or any individual domiciled
<br />in California who is absent for a temporary or
<br />transitory purpose.
<br />An individual domiciled in California who is
<br />absent from California for an uninterrupted
<br />period of at least 546 consecutive days under
<br />an employment - related contract is considered
<br />outside California for other than a temporary or
<br />transitory purpose.
<br />An individual is still considered outside
<br />California for other than a temporary or
<br />transitory purpose if return visits to California do
<br />not total more than 45 days during any taxable
<br />year covered by an employment contract.
<br />This provision does not apply if an individual
<br />has income from stocks, bonds, notes, or
<br />other intangible personal property in excess
<br />of $200,000 in any taxable year in which the
<br />employment - related contract is in effect.
<br />A spouse /RDP absent from California for
<br />an uninterrupted period of at least 546
<br />days to accompany a spouse /RDP under an
<br />employment - related contract is considered
<br />outside of California for other than a temporary
<br />or transitory purpose.
<br />Form 590 Instructions 2010 Page 1
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