Instructions For Form 593 - Real Estate Withholding Tax Statement

2017 Instructions for Form 593

Real Estate Withholding Tax Statement

General Information

Purpose

Who Must File

Use Form 593, Real Estate Withholding Tax

Anyone (individual, business entity, trust, or

Real Estate Escrow Person (REEP) – REEP

Statement, to report real estate withholding on

estate) who withheld on the sale/transfer of

is anyone involved in closing the real estate

sales closing in 2017, installment payments

California real property must file Form 593 to

transaction, which includes any attorney,

made in 2017, or exchanges that were

report the amount withheld. Typically this is

escrow company, title company, Qualified

completed or failed in 2017.

a REEP. If this is an installment sale payment

Intermediary (QI), or anyone else who receives

after escrow closed, then the buyer/transferee

Use a separate Form 593 to report the amount

and disburses payment for the sale or transfer

is the responsible person.

withheld from each seller/transferor. If the

of real property.

sellers/transferors are married or RDPs and

When and Where to File

Installment Sales – The REEP reports the sale

they plan to file a joint return, include both

or transfer as an installment sale if there will

You need three completed copies of Form 593

spouses/RDPs on the same Form 593.

be at least one payment made after the tax year

for filing and distribution. File a copy of

If the sellers/transferors are married

of the sale. The withholding is 3

% (.0333)

Form 593 and Form 593-V, along with the

or RDPs and they are entered as one

of the down payment during escrow. Buyers/

amount of tax withheld and mail to the address

seller/transferor, we treat them as having

Transferees are required to withhold on

shown in this section.

equal ownership interest. If the ownership

the principal portion of all payments made

For installment sales, submit the following at

interest is not equal, file separate Forms 593

following the close of escrow, unless an

the close of escrow:

for each seller/transferor to represent the

approval letter for elect-out method is received

correct ownership interest percentage. If

as described below.

• Form 593

the information submitted is incorrect, an

• Form 593-I, Real Estate Withholding

Elect Out of Subsequent Installment Payment

amended Form 593 must be submitted to

Installment Sale Acknowledgement.

Withholding – Sellers or transferors can

the FTB.

• Form 593-V with the amount withheld on

elect to not report the sale on the installment

the down payment.

Use Form 593-V, Payment Voucher for Real

method. If the seller/transferor chooses

• A copy of the promissory note.

Estate Withholding, to remit real estate

not to use the installment method, the

withholding payments to the FTB. Submit

seller/transferor generally reports the entire

When making installment payments

Form 593-V when Form(s) 593, is submitted

gain in the year of sale, even though the

following the close of escrow, withhold either

electronically or by mail. The REEP must

seller/transferor does not receive all the

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

use Form 593-V when remitting a payment

sale proceeds in that year. To do this, the

Optional Gain on Sale withholding percentage

by check or money order. Payments may

seller/transferor must:

on the principle portion of each installment

also be automatically withdrawn from a bank

payment, as specified by the seller/transferor

• File a California tax return and report

account via an electronic funds transfer (EFT).

on Form 593.

the entire gain on Schedule D-1, Sale of

See General Information G, Electronic Filing

Business Property.

File only a completed current year Form 593

Requirements for more information.

• Submit to the Franchise Tax Board (FTB)

and Form 593-V with each withholding

a written request to release the buyer/

payment.

Helpful Hints

transferee from withholding on subsequent

For example, if you withhold on a payment

Year of Form – The year at the top of Form 593

installment payments after filing the tax

to a seller on June 1, 2017, then use a 2017

must be the same as the year on line 2.

return and reporting the entire gain.

Form 593 and Form 593-V.

See instructions for line 2. If you do not

The FTB will approve or deny the request

Form 593-I, a copy of the promissory note,

have Form 593 with the correct year, go to

within 30 days from when received. The

and the seller’s/transferor’s signature are not

ftb.ca.gov to get the correct form.

buyer must continue to withhold until the FTB

required.

Identification Numbers – Check to see that

approves the request.

Mail to:

the REEP and seller’s/transferor's identification

For more information, get FTB 4010,

numbers are correct and listed in the same

FRANCHISE TAX BOARD

Withholding on California Real Estate

order as the names. If both a husband/RDP

PO BOX 942867

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

and wife/RDP are listed, make sure both social

SACRAMENTO CA 94267-0651

search for installment sales.

security numbers (SSNs) or individual taxpayer

Distribute the other two copies of Form 593

Registered Domestic Partners (RDP) – For

identification numbers (ITINs) are listed in the

as follows:

purposes of California income tax, references

same order as their names.

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

• Send one copy to the seller/transferor

Trusts and Trustees – It is important to

California RDP, unless otherwise specified.

within 20 days following the end of the

report the correct name and identification

When we use the initials RDP they refer to both

month in which the transaction occurred.

number when title is held in the name of

a California registered domestic “partner” and

• One copy will be retained by the REEP

a trust. If the seller/transferor is a trust,

a California registered domestic “partnership,”

for a minimum of five years and must be

see the Specific Instructions for Part II,

as applicable. For more information on

provided to the FTB upon request.

Seller/Transferor Information.

RDPs, get FTB Pub. 737, Tax Information for

Preparer’s Name and Title/Escrow Business

Registered Domestic Partners.

Name – Provide the preparer’s name and

Penalty Increase – Beginning on or after

title/escrow’s business name and phone

January 1, 2016, the penalties related to failure

number.

to file information returns increased. See

General Information F, Interest and Penalties,

or get FTB Pub. 1150, Withhold at Source

Penalty Information, for more information.

Page 6 Real Estate W/H Forms Booklet 2016

Instructions For Form 593 - Real Estate Withholding Tax Statement - 2017

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