Is your business or organization making payments/distributions in excess of $1,500 to nonresident independent contractors, shareholders or partners?
If yes, then understanding the reporting requirements under California’s nonwage income tax withholding rules should be an important consideration. Entities that have failed to withhold California income taxes are subject to tax exposure for the amount not withheld, plus applicable penalties and interest.
The California Franchise Board (“FTB”) recently announced a voluntary compliance program for entities not previously meeting withholding requirements. The new Withholding Voluntary Compliance Program (“WVCP”) represents an opportunity to limit exposure provides an indication that the FTB intends to be aggressive about pursuing withholding, under the law, going forward.