Tip of the Month - March 2008

Real Estate Tax Withholding Law Changes for 2008

When a sale escrow is opened, Sellers can expect to receive Franchise Tax Board (FTB) forms in their document package. Here are some brief guidelines to help Sellers understand the use of these forms and the changes for 2008.

Form 593-C Real Estate Withholding Certificate

Complete this form to show whether withholding applies to your transaction and return it to your escrow officer.

• If you can answer YES to any question in Part II of this form, you are exempt from withholding and no other forms are needed from you.


• If you can answer YES to any question in Part III, you may qualify for partial or complete exemption.


• If you can not answer YES to one of these questions, withholding is required, and you must complete Form 593 which is described below.


• If Form 593-C is not signed and deposited into escrow or if your social security number is missing, your escrow officer is required to withhold 3-1/3% of the sales price and to submit these funds to the Franchise Tax Board.

Form 593 Real Estate Withholding Statement

This year, Form 593-B has been eliminated and its function is now incorporated into the new Form 593 Real Estate Withholding Tax Statement.

• If you are not exempt from withholding, use this form to select your method of withholding. You may choose the standard method which is 3-1/3% of the sales price or the Optional Gain on Sale Election.


• Sellers have the option to withhold based on the amount of gain on the sale rather than the total sales price. For a Seller who is eligible, this method may result in a decrease in the amount of funds withheld at closing.


• Your financial advisor can help you determine which withholding method is best for you. Be sure to complete all information.

Return copies A and C to your escrow officer with the completed 593-C form.

Form 593-E Real Estate Withholding - Computation of Estimated Gain or Loss

Use this form as a worksheet to calculate the loss you are claiming on the property in Form 593-C or to calculate the gain on the sale and the associated withholding amount. You can also visit the FTB website to use an electronic calculator for computing your loss or gain on the property. Retain 593-E with your tax records. It does not need to be returned to your escrow officer.

New for 2008

A new Seller category has been added for Registered Domestic Partners (RDP). RDP's have the same legal benefits, protections, and responsibilities as married couples unless otherwise specified by the FTB. For more information on RDP's, see FTB Pub. 737 entitled Tax Information for Registered Domestic Partners.

As with all tax documents, Sellers are required to provide their social security numbers and to sign under penalty of perjury that they meet the exemption or withholding requirements. Your escrow officer is not authorized to provide legal or accounting advice. To avoid delays in your closing, consult with your accountant in the early days of your escrow to be sure your FTB forms are properly completed.

The FTB's website is www.ftb.gov.

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