Real Estate Withholding Reminders
The withholding law applies to the sale or transfer of California real estate by both residents and nonresidents which close on and after January 1, 2003. We spent the past ten years educating withholding agents of their withholding obligations and penalties that may apply. We continue to conduct withholding audits to enforce these requirements and we may assess penalties on withholding agents who fail to withhold or file forms late.
If real estate withholding is required, withholding agents should use Form 593, Real Estate Withholding Tax Statement, to report the withholding and Form 593-V, PaymentVoucher for Real Estate Withholding, to send the withholding to us. To ensure we process your forms and payments correctly and timely, here are a few reminders:
Accurately complete all applicable fields. Be sure that the amount withheld is entered on the form. Include a telephone number so we can reach you directly if we discover an error or omission.
Enter the correct identification number(s) on all withholding forms. If the seller has not received a taxpayer identification number, remind them to contact us when they receive it so their credit can be applied properly. This must be done before the seller files their income tax return or the withholding credit will not be available on their account.
- Make sure the year on the form matches the year of the transaction being reported.
- Use a separate Form 593, Real Estate Withholding Tax Statement, for each of the sellers (other than joint filers) to allocate the proportional share of withholding.
Make sure the information you enter for the seller or transferor on Form 593, Real Estate Withholding Tax Statement, matches the information on the Title. For trusts, refer to FTB 7429, Do I Need to Withhold on This Trust, for assistance to determine withholding and guidelines on the types of trusts.
The withholding agent’s information on Form 593-V, Payment Voucher for Real Estate Withholding, and Form 593, Real Estate Withholding Tax Statement, should be identical.
If you are sending one payment for multiple 593 forms, be sure the amount of payment matches the combined total withholding.
If a seller qualifies for an exemption from withholding for any reason, you must receive a completed and signed Form 593-C, Real Estate Withholding Certificate that includes the seller’s taxpayer identification number, prior to the close of escrow. Otherwise, the withholding agent is required to withhold.
Withholding agents should retain a copy of 593-C for five years. If you choose to provide a copy of Form 593-C to the buyer, delete the seller’s tax identification number on the buyer’s copy. Sellers should retain Form 593-E for five years.For more information on real estate withholding, please reference FTB Publication 1016, Real Estate Withholding Guidelines, or contact us at 888.792.4900