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Entertainment Industry Independent Contractors Working in the State of California
The California Franchise Tax Board has recently changed the withholding guidelines for independent contractors working in the state as a corporation, an LLC, a partnership, or as an individual.
For withholding purposes, the independent contractor will fall into either Resident or Non-resident categories. Briefly:
- Resident: If you are a corporation, LLC or partnership qualified with the California Secretary of State to do business in California and have a permanent place of business in California, you need to complete a FTB Form 590 (Withholding Exemption Certificate) and provide it to your withholding agent (whoever pays you) along with your completed W-9. Once the withholding agent receives the properly completed FTB Form 590, YOU WILL BE EXEMPT from the new withholding requirements.
If you are an individual working as an independent contractor and a California resident filing California tax returns, you will complete the W-9 and FTB Form 590 and return to your withholding agent. If both of these requirements are met, YOU WILL BE EXEMPT from the withholding requirement.
- Non-Resident: If you are a corporation, LLC or partnership not qualified with the California Secretary of State to do business in California and DO NOT maintain a permanent place of business in the state, the withholding agent has no alternative but to withhold 7% of all California income exceeding $1,500 in a calendar year.
If you are an individual working as an independent contractor and are not a California resident, your withholding agent will be required to withhold 7% of all California source income exceeding $1,500 in a calendar year.
For information regarding possible reduced or waived withholding, read the attached Franchise Tax Board Decision Charts for your specific status. Additional information may also be obtained by obtaining California Publication 1017 and/or visiting the Franchise Tax Board website at www.ftb.ca.gov. This site will also provide contact information should you have detailed questions.
Following the end of the calendar year and before January 31, those resident and non-resident independent contractors who had the 7% withheld will be provided with a FTB Form 592 (Resident and Non-Resident Withholding Tax Statement) from the withholding agent. The FTB Form will show the amount you were paid and the amount that was withheld. You will file Copy B of this form with your California return.
Attached is:
- A Decision Chart from the California Franchise Tax Board which will further detail residency/non-residency and the associated actions required.
- 2010 FTB Form 590, Withholding Exemption Certificate with instructions.
As always, should you need any additional information or assistance, please feel free to contact our offices at (310) 444-5255.
info@jacobsongrp.com