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2017 Instructions for Form 593-I

Real Estate Withholding Installment Sale Acknowledgement

General Information

as applicable. For more information on

Penalties referenced in this section will be

RDPs, get FTB Pub. 737, Tax Information for

assessed unless it is shown that the failure to

When California real estate is sold on an

Registered Domestic Partners.

notify, withhold, or timely furnish returns was

installment basis, the buyer/transferee is

due to reasonable cause.

Penalty Increase – Beginning on or after

required to withhold on the principal portion of

January 1, 2016, the penalties related to failure

each installment payment, an amount based on

Specific Instructions

to file information returns increased. See

either 3

% (.0333) of the total sales price, or

General Information B, Interest and Penalties,

the Optional Gain on Sale withholding amount

Private Mail Box (PMB) – Include the PMB

or get FTB 1150, Withhold at Source Penalty

from Form 593, Real Estate Withholding Tax

in the address field. Write “PMB” first, then

Information, for more information.

Statement, line 5. If an exemption applies,

the box number. Example: 111 Main Street

Purpose

no withholding is required. There is no

PMB 123.

withholding on the interest portion of the

Use Form 593-

, Real Estate Withholding

Foreign Address – Follow the country’s

installment payment.

Installment Sale Acknowledgement, to

practice for entering, the city, county, province,

Real Estate Escrow Person (REEP) – The

acknowledge the buyer’s/transferee’s

state, country, and postal code, as applicable,

REEP is anyone involved in closing the real

requirement to withhold on the principal

in the appropriate boxes. Do not abbreviate the

estate transaction which includes any attorney,

portion of each installment payment to the

country name.

escrow company, title company, Qualified

seller/transferor for the sale of California real

Electronic Signatures – Electronic signatures

Intermediary (QI), or anyone else who receives

property. The buyer/transferee is required to

are considered as valid as the originals.

and disburses payment for the sale of real

withhold at either the rate of 3

% (.0333)

property.

Buyer/Transferee Instructions

of the total sales price or the Optional Gain

Installment Sales – The REEP reports the sale

on Sale withholding percentage, as specified

The buyer/transferee completes Form 593-

or transfer as an installment sale if there will

by the seller/transferor on Form 593. The

Parts I, II, III, and IV. Forms are updated

be at least one payment made after the tax year

buyer/transferee provides acknowledgement

annually. Make certain that the buyer/transferee

of the sale. The withholding is 3

% (.0333)

by signing Part IV.

completes Form 593-

for the correct taxable

of the down payment during escrow.

The REEP retains this form for a minimum of

year.

Buyers/Transferees are required to withhold

five years and must provide it to the FTB upon

The buyer/transferee must withhold on the

on the principal portion of all payments made

request.

principal portion of each installment payment.

following the close of escrow, unless an

However, the buyer/transferee may authorize

Interest and Penalties

approval letter for elect-out method is received

the REEP to withhold on the down payment. In

as described below.

Interest will be assessed on late withholding

this case the buyer/transferee withholds on the

Elect Out of Subsequent Installment

payments and is computed from the due date

principal portion of all subsequent payments

Payment Withholding - Sellers or transferors

to the date paid. If the REEP does not notify

(including payoff or balloon payments).

can elect to not report the sale on the

the buyer/transferee, other than a QI, of the

After completing the form, the buyer/transferee

installment method. If the seller/transferor

withholding requirements in writing, the

copies all pages to keep the instructions

chooses not to use the installment method,

penalty is the greater of $500 or 10% of the

for withholding on subsequent payments.

the seller/transferor generally reports the

required withholding.

The buyer/transferee gives the original

entire gain in the year of sale, even though

If after notification, the buyer/transferee, unless

Form 593-

, a copy of the promissory note, the

the seller/transferor does not receive all the

the buyer is a QI in a deferred exchange, does

seller’s/transferor’s Form 593, and Form 593-V,

sale proceeds in that year. To do this, the

not withhold, the penalty is the greater of $500

Payment Voucher for Real Estate Withholding,

seller/transferor must:

or 10% of the required withholding.

to the REEP. At the close of escrow, if no down

y File a California tax return and report

If the buyer/transferee or REEP does not

payment is received, submit Form 593 with

the entire gain on Schedule D-1, Sale of

furnish complete and correct copies of

Part III, Line 3, B, Installment Sale Payment

Business Property.

Form 593 to the seller/transferor by the due

checked and $0 reported on Line 5, Amount

y Submit to the Franchise Tax Board

date, the penalty is $100 per Form 593. If the

Withheld from this Seller/Transferor. The REEP

(FTB) a written request to release the

failure is due to an intentional disregard of the

will mail the documents to the FTB with the

buyer/transferee from withholding on

requirement, the penalty is the greater of $250

withholding on the down payment to:

subsequent installment payments after filing

or 10% of the required withholding.

FRANCHISE TAX BOARD

the tax return and reporting the entire gain.

We assess a penalty for failure to file complete,

PO BOX 942867

The FTB will approve or deny the request

correct, and timely information returns. The

SACRAMENTO CA 94267-0651

within 30 days from when received. The

penalty is calculated per seller:

For installment sales, submit the following at

buyer must continue to withhold until the FTB

y $30 if filed 1 to 30 days after the due date.

the close of escrow:

approves the request.

y $60 if filed 31 days to 6 months after the

y Form 593

For more information, get FTB 4010,

due date.

y Form 593-

Withholding on California Real Estate

y $100 if filed more than 6 months after the

y Form 593-V, with the amount withheld on

Installment Sales, or go to ftb.ca.gov and

due date.

the down payment.

search for installment sales.

(R&TC Section 19183)

y A copy of the promissory note.

Registered Domestic Partners (RDP) – For

If the failure is due to an intentional disregard

When making installment payments

purposes of California income tax, references

of the requirement, the penalty is the greater of

following the close of escrow, withhold either

to a spouse, husband, or wife also refer to a

$250 or 10% of the required withholding.

% (.0333) of the total sales price, or the

California RDP, unless otherwise specified.

Optional Gain on Sale withholding percentage

When we use the initials RDP they refer to both

For more information, get FTB 1150.

on the principle portion of each installment

a California registered domestic “partner” and

payment, as specified by the seller/transferor

a California registered domestic “partnership,”

on Form 593.

Page 20 Real Estate W/H Forms Booklet 2016

Instructions For Form 593-I - Real Estate Withholding Installment Sale Acknowledgement - 2017

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