Tax News
No Close of Escrow Date May Trigger a Penalty

Generally, California law requires withholding on sales or transfers of California real property when the total sale price exceeds $100,000 unless an exemption applies.

Withholding agents use Form 593, Real Estate Withholding Tax Statement, to report real estate withholding on closed sales, installment payments made, or exchanges completed or failed on or after January 1, 2008. Agents use a separate Form 593 to report the amount withheld from each seller.

Real estate withholding is due to us by the 20th day of the month following the month escrow closes. When no date is entered on Line 2 of the Form 593, we will use a default date of January 1, of the tax year in which the Form 593 is received.

For example, if you submit a 2012 Form 593 with no date entered on Line 2; we will deem the date escrow closes to be January 1, 2012.
Omitting the date escrow closes may result in an information return penalty.
The penalty is calculated per payee:

  • $15 if filed 1 to 30 days after the due date
  • $30 if filed 31 days to six months after the due date
  • $50 if filed more than 6 months after the due date

This penalty may also be assessed for failure to file a complete, correct, and timely Form 593. Furthermore, if the noncompliance is due to an intentional disregard of the requirements, the penalty amount increases to the greater of $100 or 10 percent of the required withholding.
If you have submitted an incomplete Form 593, you may contact us at 888.792.4900 to provide the correct closing date information.

For information relating to the requirements for proper notification of buyers, see FTB Publication 1016, Real Estate Withholding Guidelines.

Back to September 2012 Tax News