Form 13614-nr: CA Nonresident Withholding Worksheet

Nonresident individuals and businesses with income from California sources use the Nonresident Withholding Allocation Worksheet, or Form 587, to ensure the correct state tax is withheld. This form provides a method for calculating the portion of income that is subject to California’s withholding rules. It is requested by the withholding agent for nonresidents who perform services both inside and outside California.

Purpose of the Nonresident Withholding Allocation Worksheet

California tax law requires payers to withhold tax on payments to nonresidents for income from California sources, such as services performed in the state, rents, or royalties. If a nonresident does not provide allocation information, the withholding agent must withhold at a 7% rate on the total payment. This applies if payments for the calendar year are expected to exceed $1,500.

The function of Form 587 is to prevent such over-withholding. By completing the worksheet, a nonresident certifies the portion of their income from California sources. This allows the withholding agent to apply the 7% withholding rate only to the income earned in the state, resulting in a more accurate withholding amount.

This process is different from obtaining a full waiver of withholding, which requires Form 588, the Nonresident Withholding Waiver Request, submitted to the Franchise Tax Board (FTB). Form 587 does not eliminate withholding but refines the calculation based on information provided directly to the payer.

Information and Calculations for Form 587

To complete the worksheet, you must estimate the total gross payments you expect to receive from a single withholding agent for the entire calendar year. You then determine what portion of those payments is for services performed or income earned while physically within California versus outside the state. This allocation is a key part of the form’s calculation.

The worksheet requires you to break down your expected payments by income type, such as rents, royalties, or payments for services. For each relevant income type, you will enter figures into three columns: the amount earned “Within California,” the amount earned “Outside California,” and the total payments.

After itemizing the income, you calculate the total in the “Within California” column. This figure represents the total California-source income from that payer for the year. If this amount is greater than $1,500, the withholding agent must withhold 7% on payments until the tax on that entire amount has been collected. The form isolates the income base for the standard 7% rate and does not create a custom rate.

You must provide a valid Taxpayer Identification Number (TIN), such as a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). The form also requires you to identify the type of payment you are receiving. If you provide only goods or perform all services entirely outside of California, no withholding is required, and you can indicate this on the form.

Submitting the Worksheet and Next Steps

Once you have completed and signed the worksheet, you provide it directly to the entity that is paying you. This withholding agent, not the California Franchise Tax Board (FTB), is the intended recipient of Form 587. The payer is required to keep the completed form with their records as justification for the withholding amount. The form should be submitted when the contract is established and before payments begin.

The withholding agent will use the information from your submitted worksheet to determine their withholding obligation. They will apply the 7% withholding rate to the California-source income you identified. This results in a more precise amount of tax being taken from your payments compared to the default method of withholding on the gross amount.

It is important to monitor the circumstances under which the form was filed. If the facts change significantly during the year, such as a change in the allocation of your work, you are required to submit a new, updated Form 587 to the withholding agent. This ensures the amount being withheld continues to accurately reflect your California tax obligation for the year.