Federal & State Withholding Regulations

FIRPTA--Foreign Inestors Real Property Taxation Act

Requires 10% of sales price to be withheld for foreign ownership.
Applies to non-resident aliens of USA, including foreign partnerships, foreign trusts and foreign estates.
Buyer's responsibility to report and withhold, not the escrow officer.
Exceptions under Internal Revenue Code (IRC 1034): Sales price not over $300,000 and buyer will use the property as his/her principal residence.
Seller can request a waiver or reduced withholding on Form 8288-B (tax identification number required).
Payment of Forms 8288 and 8288-A are due within 20 days of closing (tax identification number required).
IRS penalties are steep if forms an/or payment are received late.

Requires that 3 1/3% of sales price be paid to the Franchise Tax Board.
Applies to non-owner-occupied property.
Prepayment of California state income tax for sellers on the taxable gain of California real property.
Requires the buyer to withhold 3 1/3% of thetotal sales price.
Buyer's responsibility to report and withhold; it can be passed onto escrow.
Escrow must inform the buyer of the responsibility (in escrow general provisions).
Escrow must accept responsibility if buyer requests it.
Payment and Form 593 and 593-B to FTB by 20th day of month after closing.
Interest due on all late payments (FTB calculates, and interest can be substantial).
Escrow can charge a fee for processing withholding or waiver.
Escrow cannot charge for giving written notice to parties or obtaining 593-C and 593-W Certifications.

Property is seller's principal residence under IRC 121
Total Sales price is $100,000 or less.
The seller will incur a loss on the sale for California Income Tax purposes.
Non-Recognition rules apply.
Simultaneous or delayed exchange.
Installment sales.
The property is being involuntarily converted and will qualify for non-recognition of gain for California Income Tax purposes uner IRC Sction 1033.

The Home Selling Process: