The California Form 587 is a Nonresident Withholding Allocation Worksheet designed to help determine the amount of tax withholding required on payments made to nonresidents for services performed in California. This form is essential for both withholding agents and payees, as it outlines the necessary information to ensure compliance with California tax regulations. If you need to fill out this form, click the button below to get started.
The California Form 587, known as the Nonresident Withholding Allocation Worksheet, plays a crucial role in determining the withholding tax obligations for payments made to nonresidents. Designed for use by withholding agents, this form collects essential information about both the withholding agent and the nonresident payee. It covers various aspects, including the type of payment being made, the allocation of income between California and outside sources, and the payee's certification of the provided information. Specifically, the form requires the withholding agent to identify their details, while the nonresident payee must disclose their entity type and payment specifics. Notably, withholding is generally required when services are performed in California, unless the payee qualifies for a waiver. Understanding the nuances of this form is vital for compliance with California tax regulations, especially since failure to withhold appropriately can lead to significant penalties. The California Form 587 not only facilitates the proper collection of taxes but also ensures that nonresidents are aware of their tax responsibilities when engaging in business within the state.
TAXABLE YEARCALIFORNIA FORM
2011 Nonresident Withholding Allocation Worksheet
587
Part I Withholding Agent
Withholding agent’s name
Address (number and street, PO Box, or PMB no.)
Apt. no./Ste. no.
City
State ZIP Code
-
Part II Nonresident Payee (Complete Part II through Part V and return this form to the above withholding agent)
Payee’s name
Owner’s full name if sole proprietor
State
ZIP Code
SSN or ITIN CA Corp. no. FEIN
Secretary of State (SOS) file no.
Daytime telephone number
(
)
Nonresident payee’s entity type: (Check one)
Individual/sole proprietor
Corporation
Partnership
Limited liability company (LLC)
Estate or trust
Part III Payment Type
Nonresident payee: (Check one)
Performs services totally outside California (no withholding required, skip to Part V)
Provides only goods or materials (no withholding required, skip to Part V)
Provides goods and services in California (see allocation in Part IV)
Provides services within and outside California (see allocation in Part IV)
Other (Describe)____________________________________________________________
If the payee performs all the services within California, withholding is required on the entire payment for services unless the payee is granted a withholding waiver from the Franchise Tax Board (FTB). For more information, get FTB Pub. 1017, Resident and Nonresident Withholding Guidelines.
Part IV Income Allocation
Gross payments expected from the above withholding agent during the calendar year for:
(a) Within California
(b) Outside California
(c) Total payments
1
Goods and services:
Goods/materials (no withholding required)
___________________________
Services (withholding required)
___________________________ ___________________________
2
Rents or lease payments
3
Royalty payments
4
Prizes and other winnings
5
Other payments
6
Total payments subject to withholding.
Add column (a), line 1 through line 5
Withholding threshold amount:
$1,500.00
Withholding is optional, at the discretion of the withholding agent, on the first $1,500 in payments made during the calendar year. Withholding must begin as soon as the total payments of California source income for the calendar year exceed $1,500. If the FTB grants the withholding waiver, attach a copy of the FTB determination letter. See General Information E, Waivers.
Part V Certiication of Payee
Under penalties of perjury, I certify that the information provided on this document is true and correct. If the reported facts change, I will promptly inform the withholding agent.
Authorized representative’s signature
Title
Payee’s signature
Date
For Privacy Notice, get form FTB 1131.
7041113
Form 587 C2 2010
Instructions for Form 587
Nonresident Withholding Allocation Worksheet
References in these instructions are to the California Revenue and Taxation Code (R&TC).
General Information
Beginning January 1, 2008, domestic nonresidents may use Form 589, Nonresident Reduced Withholding Request, to request the reduction in the standard seven percent withholding amount that is applicable to California source payments made to nonresidents.
Backup Withholding – Beginning on or after January 1, 2010, with certain limited exceptions, payers that are required to withhold and remit backup withholding to the Internal Revenue Service (IRS) are also required to withhold and remit to the Franchise Tax Board (FTB). The California backup withholding rate is 7% of the payment. For California purposes, dividends, interests, and any financial institutions, release of loan funds made in the normal course of business are exempt from backup withholding.
If a payee has backup withholding, the payee must contact the FTB to provide a valid Taxpayer Identification Number (ITIN) before filing a tax return. The following are acceptable TINs: social security number (SSN); individual taxpayer identification number (ITIN); federal employer identification number (FEIN); California corporation number (CA Corp No.); or California Secretary of State (SOS) file number. Failure to provide a valid TIN will result in the denial of
the backup withholding credit. For more information, go to ftb.ca.gov and search for backup withholding.
Private Mail Box (PMB) – Include the PMB in the address field. Write “PMB” first, then the box number. Example: 111 Main Street PMB 123.
Foreign Address – Enter the information in the following order: City, Country, Province/Region, and Postal Code. Follow the country’s practice for entering the postal code. Do not abbreviate the country’s name.
A Purpose
Use Form 587, Nonresident Withholding Allocation Worksheet, to determine
the amount of withholding required on payments to nonresidents.
The payee completes, signs, and returns Form 587 to the withholding agent. The withholding agent relies on the certification made by the payee to
determine the amount of withholding required, provided the completed and signed Form 587 is accepted in good faith. Retain the completed Form 587 for your records for a minimum of four years and provide it to the FTB upon request.
Do not use Form 587 if any of the following applies:
•Payment to a nonresident is only for the purchase of goods.
•You sold California real estate. Use Form 593-C, Real Estate Withholding Certificate.
•The payee is a resident of California or is a non-grantor trust that has at least one California resident trustee.
Use Form 590, Withholding Exemption Certificate.
•The payee is a corporation, partnership, or limited liability company (LLC) that has a permanent place of business in California or is qualified to do business in California. Foreign corporations must be qualified to transact intrastate business. Use Form 590.
•The payment is to an estate and the decedent was a California resident. Use Form 590.
B Requirement
California Revenue and Taxation Code (R&TC) Section 18662 and the related regulations require withholding of income or franchise tax on certain payments made to nonresidents of California for personal services performed in California and for rents on property located in California and royalties with activities in California. The withholding rate is seven percent (.07) unless the FTB grants a waiver. See General Information E, Waivers.
C When to File This Form
The withholding agent requests that the payee completes, signs, and returns Form 587 when a contract is entered into or before payment is made to the payee. The withholding agent retains Form 587 for a minimum of four years and must provide it to the FTB upon request.
Form 587 remains valid for the duration of the contract (or term of payments), provided there is no material change in the facts. By signing Form 587, the payee agrees to promptly notify the withholding agent of any changes in the facts.
D Withholding Requirements
Payments made to nonresident payees (including individuals, corporations, partnerships, LLCs, estates, and trusts) are subject to withholding. However, no withholding is required if total payments of California source income to the payee during the calendar year are $1,500 or less.
If the California resident, qualified corporation, LLC, or partnership is acting as an agent for the nonresident payee, the payment is subject to withholding if the nonresident payee does not meet any of the exceptions on Form 590.
Payments subject to withholding include the following:
•Payments for services performed in California by nonresidents.
•Payments made in connection with a California performance.
•Rent paid to nonresidents if the rent is paid in the course of the withholding agent’s business.
•Royalties paid to nonresidents from business activities in California.
•Payments of prizes for contests entered in California.
•Distributions of California source income to nonresident beneficiaries from an estate or trust.
•Other payments of California source income made to nonresidents.
Payments not subject to withholding include payments:
•To a resident of California or to a corporation with a permanent place of business in California.
•To a corporation qualified to do business in California.
•To a partnership or LLC that has a permanent place of business in California.
•For sale of goods.
•For income from intangible personal property, such as interest and dividends, unless the property has acquired a business situs in California.
•For services performed outside of California.
•To a payee that is a tax-exempt organization under either California or federal law, use Form 590.
Form 587 Instructions 2010 Page 1
•Representing wages paid to employees. Wage withholding is administered
by the California Employment Development Department (EDD). For more information, contact your local EDD office.
•To a payee that is a government entity.
•To reimburse a payee for expenses relating to services performed in California if the reimbursement is separately accounted for and not subject to federal Form 1099 reporting. Corporate payees, for purposes of this exception, are treated as individual persons.
E Waivers
A nonresident payee may request that withholding be waived. To apply for a withholding waiver, use Form 588, Nonresident Withholding Waiver Request. If the FTB has granted a waiver, you must attach a copy of FTB’s determination letter to Form 587.
FRequirement to File a California Tax Return
A payee’s exemption certification on Form 587, Form 590, or a determination letter from the FTB waiving withholding does not eliminate the requirement to file a California tax return and pay the tax due. For return filing requirements, see the instructions for Long or Short Form 540NR, California Nonresident or Part-Year Resident Income Tax Return; Form 541, California Fiduciary Income Tax Return; Form 100, California Corporation Franchise or Income Tax Return; or Form 100S, California S Corporation Franchise or Income Tax Return.
Specific Instructions
Part I – Withholding Agent
The withholding agent must complete Part I before giving Form 587 to the payee.
Part II – Nonresident Payee
The payee must complete all information in Part II including the social security number, individual taxpayer identification number, California corporation number, FEIN, or SOS file number, and entity type.
Part III – Payment Type
The nonresident payee must check the box that identifies the type of payment being received.
No withholding is required when payees are residents or have a permanent place of business in California.
Part IV – Income Allocation
Use Part IV to identify payments that are subject to withholding. Only payments sourced within California are subject
to withholding. Services performed in California are sourced in California. In the case of payments for services performed when part of the services are performed outside California, enter the amount paid for performing services within California in column (a). Enter the amount paid for performing services while outside California in column (b). Enter the total amount paid for services in column (c).
If the payee’s trade, business, or profession carried on in California is an integral part of a unitary business carried on within and outside California, the amounts included on line 1 through line 5 should be computed by applying the payee’s California apportionment percentage (determined in accordance with the provisions of the Uniform Division of Income for Tax Purposes Act) to the payment amounts. For more information on apportionment, get California Schedule R, Apportionment and Allocation of Income.
Withholding agent. Withholding is optional, at your discretion, on the first $1,500 in payments made during the calendar year. Withholding must begin as soon as the total payments of California source income for the calendar year exceed $1,500. If circumstances change during the year (such as the total amount of payments), which would change the amount on line 6, the payee must submit a new Form 587 to the withholding agent reflecting those changes. The withholding agent should evaluate the need for a new Form 587 when a change in facts occurs.
Part V – Certification of Payee
The payee and/or the authorized representative must complete, sign, date, and return this form to the withholding agent.
Authorized representatives include those persons the payee authorized to act on their behalf through a power of attorney, third party designee, or other individual taxpayers authorized to view their confidential tax data via a waiver or release.
Additional Information
For additional information or to speak to a representative regarding this form, call the Withholding Services and Compliance automated telephone service at:
888.792.4900, or 916.845.4900 FAX 916.845.9512
OR write to:
WITHHOLDING SERVICES AND COMPLIANCE MS F182 FRANCHISE TAX BOARD
PO BOX 942867 SACRAMENTO CA 94267-0651
You can download, view, and print California tax forms and publications at ftb.ca.gov.
TAX FORMS REQUEST UNIT MS F284 FRANCHISE TAX BOARD
PO BOX 307
RANCHO CORDOVA CA 95741-0307
For all other questions unrelated to withholding or to access the TTY/TDD numbers, see the information below.
Internet and Telephone Assistance Website: ftb.ca.gov
Telephone: 800.852.5711 from within the United States 916.845.6500 from outside the United States
TTY/TDD: 800.822.6268 for persons with hearing or speech impairments
Asistencia Por Internet y Teléfono Sitio web: ftb.ca.gov
Teléfono: 800.852.5711 dentro de los
Estados Unidos 916.845.6500 fuera de los Estados Unidos
TTY/TDD: 800.822.6268 personas con discapacidades auditivas y del habla
By Automated Phone Service: Use this service to check the status of your refund, order California forms, obtain payment and balance due information, and hear recorded answers to general questions. This service is available 24 hours a day, 7 days a week, in English and Spanish.
Telephone: 800.338.0505 from within the United States 916.845.6600 from outside the United States
Follow the recorded instructions. Have paper and pencil available to take notes.
Page 2 Form 587 Instructions 2010
Completing the California Form 587 is essential for determining the required withholding on payments made to nonresidents. After filling out this form, it should be returned to the withholding agent, who will use the information to assess the withholding obligations. Ensure all sections are accurately completed to avoid delays or issues with processing.
California Form 587, known as the Nonresident Withholding Allocation Worksheet, is designed to determine the amount of withholding required on payments made to nonresidents. It helps ensure compliance with California tax laws by allowing withholding agents to accurately assess tax obligations related to payments for services performed within the state.
Both the withholding agent and the nonresident payee must complete Form 587. The withholding agent, typically the entity making the payment, must fill out Part I. The nonresident payee must complete Parts II through V, providing necessary information such as their taxpayer identification number and the type of payment they are receiving.
Withholding is required when nonresidents perform services in California or receive certain types of payments, such as rents or royalties connected to California activities. If the total payments to a nonresident exceed $1,500 within a calendar year, withholding must begin. However, payments for goods or services performed entirely outside California do not require withholding.
If a nonresident payee believes they qualify for a withholding waiver, they can apply using Form 588, the Nonresident Withholding Waiver Request. If the Franchise Tax Board grants this waiver, the payee must attach a copy of the determination letter to Form 587 when submitting it to the withholding agent.
The withholding agent must retain Form 587 for a minimum of four years. This record-keeping is crucial as the Franchise Tax Board may request to review these documents to ensure compliance with withholding requirements.
If any information provided on Form 587 changes, the payee is required to promptly inform the withholding agent. This includes changes in taxpayer identification numbers, payment types, or any other relevant details that could affect withholding obligations.
Incomplete Information: Failing to fill out all required fields can lead to delays. Ensure that the payee’s name, address, and identification numbers are fully provided.
Incorrect Entity Type: Selecting the wrong entity type can cause issues. Payees must accurately check the box that corresponds to their business structure, such as individual, corporation, or LLC.
Misclassification of Payment Type: It’s crucial to correctly identify the type of payment being received. Misclassifying the payment can result in incorrect withholding calculations.
Overlooking the Withholding Threshold: Not recognizing the $1,500 threshold for withholding can lead to unnecessary deductions. Payments below this amount may not require withholding.
Failure to Sign: Neglecting to sign the form is a common mistake. Both the payee and any authorized representative must sign and date the form to validate it.
Not Updating Changes: If circumstances change, such as a change in payment amounts, it is essential to submit a new Form 587. Failing to do so can lead to compliance issues.
The California Form 587 is essential for determining the withholding tax on payments made to nonresidents. When using this form, several other documents may also be needed to ensure compliance with California tax regulations. Below is a list of related forms that are commonly used in conjunction with Form 587.
These forms work together to ensure that the correct amount of tax is withheld and reported. Understanding how each document relates to Form 587 can help streamline the process and ensure compliance with California tax laws.
The California Form 588, Nonresident Withholding Waiver Request, is similar to Form 587 in that both are used by nonresident payees to address withholding requirements. While Form 587 is primarily focused on determining the withholding amount on payments, Form 588 allows nonresidents to request a waiver from the standard withholding rate. This means that if a nonresident believes they qualify for a reduced withholding rate or no withholding at all, they can submit Form 588 to the Franchise Tax Board (FTB) for consideration.
Form 590, Withholding Exemption Certificate, is another document related to nonresident withholding. Like Form 587, it is used to certify the status of a payee. However, Form 590 is specifically for individuals or entities that can claim an exemption from withholding due to their residency status or because they have a permanent place of business in California. It serves as a declaration that the payee is not subject to withholding, which can simplify payment processes for both parties.
Form 593-C, Real Estate Withholding Certificate, is used when payments are made related to the sale of California real estate. Similar to Form 587, it addresses withholding requirements but is specific to real estate transactions. This form ensures that the appropriate withholding amount is calculated and remitted to the FTB when a nonresident seller is involved in a real estate deal, safeguarding California's tax interests.
Form 590-A, Withholding Exemption Certificate for Nonresident Partners, is specifically designed for partnerships. Like Form 587, it focuses on withholding but is tailored for nonresident partners in a partnership that generates income in California. This form allows nonresident partners to claim exemption from withholding if they meet certain criteria, thus streamlining the tax compliance process for partnerships operating in California.
Form 1040-NR, U.S. Nonresident Alien Income Tax Return, is essential for nonresidents to report their income. While Form 587 determines withholding amounts, Form 1040-NR is where nonresidents ultimately report their total income and calculate their tax liability. Both forms are interconnected, as the withholding determined on Form 587 impacts what nonresidents report on their tax returns.
Form 1099-MISC, Miscellaneous Income, is another relevant document. This form is used to report various types of income paid to nonresidents, including rents and royalties. While Form 587 focuses on withholding calculations, Form 1099-MISC is used for reporting income after payments have been made. This ensures that both the payer and the payee are compliant with federal tax reporting requirements.
Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, is utilized by foreign individuals or entities to certify their non-U.S. status. Similar to Form 587, it helps determine the withholding tax rate applicable to payments made to non-U.S. persons. This form is critical for ensuring compliance with U.S. tax laws when making payments to foreign entities, thus helping to avoid over-withholding.
Lastly, Form 945, Annual Return of Withheld Federal Income Tax, is used to report and remit federal income tax withheld from nonresident payments. While Form 587 is specific to California withholding, Form 945 serves a broader purpose by addressing federal withholding obligations. Both forms are essential for ensuring that the correct amounts are withheld and reported, thus facilitating compliance with tax regulations at both state and federal levels.
When filling out the California 587 form, it's crucial to follow certain guidelines to ensure accuracy and compliance. Here’s a list of what you should and shouldn’t do:
By adhering to these guidelines, you can help ensure that the process runs smoothly and that you meet all necessary requirements.
This form is applicable to various entity types, including corporations, partnerships, limited liability companies (LLCs), and estates or trusts. It is not limited to individual payees.
Withholding is generally required on payments made to nonresidents for services performed in California. The requirement depends on the nature of the payment and the location of the service.
While withholding is not required for total payments of California source income under $1,500, Form 587 should still be completed and retained for records to demonstrate compliance.
The withholding agent must complete Part I of the form before providing it to the payee. They also have a duty to retain the form for a minimum of four years.
If any reported facts change, the payee is required to inform the withholding agent and may need to submit a new Form 587 reflecting those changes.
A waiver from withholding does not exempt the payee from the obligation to file a California tax return and pay any taxes due.
Payments for goods are exempt from withholding only if they are not associated with services performed in California. If services are involved, withholding may still apply.
Form 587 is used to determine the amount of withholding required on payments made to nonresidents for services performed in California.
The withholding agent must complete Part I before giving the form to the payee. The payee must fill out their information in Part II, including their taxpayer identification number.
Withholding is required if total payments exceed $1,500 in a calendar year. For the first $1,500, withholding is optional at the discretion of the withholding agent.
Payments for services performed entirely outside California do not require withholding. The payee should indicate the type of payment in Part III.
Both the payee and the authorized representative must sign and date the form in Part V. The withholding agent should keep the completed form for at least four years.