What Is Form 592-B and When Do You Need to Use It?

California requires certain tax forms for withholding purposes, and Form 592-B is one of them. This form provides recipients with a record of state income tax withheld on their behalf, typically in situations involving nonresident payments or pass-through entities.

Who Must Use This Form

Form 592-B is issued to individuals and entities that have had California state income tax withheld from payments they received. This applies primarily to nonresidents earning income from California sources, such as independent contractors, business partners, or shareholders of pass-through entities. Since California requires withholding on certain payments to nonresidents, the form serves as proof of the amount withheld for state tax filing.

Entities responsible for withholding and issuing Form 592-B include partnerships, LLCs classified as partnerships, S corporations, and trusts that distribute income to nonresident partners, members, shareholders, or beneficiaries. These entities must withhold tax at the applicable rate—7% for nonresident individuals and 8.84% for nonresident corporations—on California-source income before making distributions. The withheld amount is reported to the Franchise Tax Board (FTB), and Form 592-B is provided to the recipient.

Withholding agents such as escrow companies or property managers may also need to issue this form for real estate transactions involving nonresident sellers. If a nonresident sells property in California, state law requires withholding on the sale proceeds, documented using Form 592-B. This ensures California collects taxes on income earned within its jurisdiction.

Transactions That Require Issuance

Form 592-B is required when California-source income is subject to withholding. One common scenario is payments to nonresident independent contractors or service providers performing work in California. If a business hires an out-of-state consultant or freelancer for a project in California, taxes may need to be withheld, and Form 592-B issued.

Rental income distributed to nonresident property owners is another situation requiring this form. Property managers handling California rental properties may need to withhold state taxes before disbursing earnings to landlords who live outside the state.

Royalty payments for intellectual property used in California also require withholding and the issuance of Form 592-B. This applies to nonresident individuals or businesses receiving royalties from patents, trademarks, copyrights, or other intellectual assets used in the state. For example, if a California-based company licenses a patent from an out-of-state owner, withholding may be required on the royalty payments.

Steps for Completing the Form

Filling out Form 592-B accurately is essential to avoid processing delays or compliance issues. The form begins with identification details, including the name, address, and taxpayer identification number (TIN) of both the withholding agent and the recipient. Ensuring this information matches what is on file with the FTB helps prevent reporting discrepancies.

The next section requires specifying the type of income subject to withholding, such as payments from partnerships, S corporations, or trusts. Selecting the correct income category is important, as different types of income have different withholding rules.

The withheld amount must be recorded precisely, matching the amounts reported to the FTB on Form 592 or Form 592-PTE. Any discrepancies between these forms can lead to processing delays or additional scrutiny. Withholding agents should reconcile their records before issuing Form 592-B.

Reporting Withheld Amounts

Withheld amounts must be reported accurately to the FTB, as they are credited against the recipient’s state tax liability. Any discrepancies between reported figures and actual withholdings can result in delays or additional tax assessments.

Amounts withheld are reported using Form 592 or Form 592-PTE, depending on the withholding entity. These forms reconcile total withholdings with what has been remitted to the FTB. Once the withholding agent submits these filings, the recipient can use Form 592-B to claim the withheld amount as a credit on their California tax return. Ensuring consistency across all reported figures helps avoid mismatches that could lead to inquiries from tax authorities.

Filing Procedures

Form 592-B must be provided to the income recipient by January 31 of the following year. The withholding agent must also submit a copy to the FTB along with Form 592-F, which reconciles all withholding payments made during the year.

Electronic filing is required for withholding agents submitting 250 or more forms, though smaller filers may also use the FTB’s online system. If filing by mail, completed forms should be sent to the appropriate FTB address listed in the form instructions. Late or incorrect submissions can delay processing and affect the recipient’s ability to claim the withheld tax as a credit. Keeping thorough records of withheld amounts, submission dates, and confirmation receipts helps withholding agents avoid compliance issues.

Potential Penalties

Failure to comply with withholding and reporting requirements can result in financial penalties. The FTB imposes penalties for late filings, inaccurate reporting, and failure to withhold when required. If a withholding agent does not provide Form 592-B to the recipient by the deadline, they may face a penalty of $50 per form.

If the required tax is not remitted to the FTB, additional penalties and interest charges apply. The penalty for failing to withhold is generally equal to the amount that should have been withheld, plus interest from the original due date. If underreporting is intentional or fraudulent, the FTB may impose more severe penalties, including a percentage-based fine on the unpaid amount. Income recipients who incorrectly report withheld amounts on their tax returns may also face penalties.