Nonresident California Withholding on Physician Compensation
January 1st, 2015 1 Min readDownload as PDF
California (CA) tax law Code Section 18662 and related Regulations require the withholding of
California income tax at a flat rate of 7% on all compensation paid to nonresident independent
contractors (physicians) performing services in CA. The tax withholding and the gross
compensation paid on CA assignments are annually reported on CA Form 592-B to the physician
and the State similar to the Federal Form 1099-MISC reporting. This withholding and reporting does
not apply to CA residents.
The withholding also applies to the payments made to nonresident professional or personal service
corporations or other types of entities that are not registered and not filing corporate income tax
returns in CA.
No withholding is required if the payments to the physician or corporation will not exceed $1,500 in
the calendar year.
The physician or professional corporation performing the service will offset the withholding reported
to them on Form 592-B against their annual CA income tax return liability similar to the Federal and
state income tax withholding reported on Form W-2 to employees.
Nonresident physicians or their professional corporations can avoid the withholding only if they
provide the Company an executed Withholding Exemption Certificate, California Form 590. To
complete the form the physician must represent, under penalties of perjury, that he/she is a CA
resident or their corporation has a permanent place of business in CA or it is qualified to do business
in CA.
More information and the forms can be secured from California on their Internet site at www.ftb.ca.gov.
Tax information contained in this document is not intended to be used, and cannot be used, by any person as a basis for avoiding tax penalties that may be imposed by the IRS or any state. We recommend each taxpayer seek advice based on their circumstances from an independent tax advisor.
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