The State Franchise Tax Board (FTB) wants to ensure that businesses are compliant in regards to withholding taxes when it comes to nonresidents. Generally, if a business pays a nonresident independent contractor more than $1,500 in a calendar year, the business is responsible for withholding 7% of the payment and sending it to FTB. Nonresidents are required to file tax returns on the income they earn in California; this withholding is a prepayment of the tax that may be due on that income.
The FTB website has many tools and information on this topic to help you stay compliant.
• Determine if withholding is required, you may conduct an agent self-test – www.ftb.ca.gov/individuals/wsc/self_test/selftest.asp
• Retrieve general information on the three stages of withholding – www.ftb.ca.gov/forms/misc/1018.pdf
• Access current year forms and publications – www.ftb.ca.gov/individuals/wsc/forms_and_publications.shtml
• Review the withholding voluntary compliance program to assist self-agents in remitting past due, non-wage withholding – www.ftb.ca.gov/individuals/wsc/Withholding_Voluntary_Compliance_Program/index.shtml
For further information, please visit the FTB website at www.ftb.ca.gov.