California Withholding. Part 1. An overview.

Effective January 1, 2010 California Assembly Bill X4 18 (Tax Code 18664) will require 7% backup withholding be imposed for those California residents that are subject to Federal backup withholding and for non-California residents who are subject to Federal backup withholding for reportable payments sourced in California.

It is believed that dividends and interest are not subject to this California backup withholding but the proceeds of the sales of securities reported on Form 1099-B are.

Wonder why a distinction was made betweek California residents and non-California residents since reportable income sourced in California is subjected to the 7% withholding in both cases.

Interesting approach.

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