The state of California has a law that requires property managers to withhold a percentage of rental income earned by rental properties located in California by rental owners who live out of state. This tax is usually paid quarterly to the state.
- Create a new expense account on your chart of accounts called "CA withholding tax expense". Also create a new liability account called "CA withholding tax liability".
- Calculate how much tax needs to be withheld.
- Each month, enter a general journal entry with the following details:
- Debit CA withholding tax expense: $100
- Credit CA withholding tax liability: $100
Each month, record a check with the two line items. The total of the check should be $0.
Property Account Amount Property A CA withholding tax expense $100 Property A CA withholding tax liability -$100
If the amount to be withheld will be the same each month, use a recurring check instead.
- When the tax is due, pay the bill using the CA withholding tax liability account.
Things to think about:
- Buildium does not currently offer a way to calculate the check based on a percentage. You'll need to manually calculate the amount.
- If the amount is the same each month, consider using a recurring check.
- You can use the guidance above for FIRPTA Withholdings.