2003 CALIFORNIA WITHHOLDING LAWThis Article is designed to be of general interest. The specific techniques and information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser. California Real Property Tax Withholding formerly applied only to out-of-staters. A new law just signed (10/02) by the Governor makes it apply to any seller (effective 2003), unless an exception applies. First of all remember that withholding is not terrible. Most people have taxes withheld from their paychecks, and get credit for it next year when they file their Tax Returns. Effective 1/1/2003, 3.33% withholding will be required for ANY SELLER of California real estate unless it meets an exception. There are 4 exceptions:
If these exceptions do not apply, the Buyer (actually, it will be the Escrow Company, acting for the Buyer) must withhold and send to the State 3.33% of the sales price. Examples:
Under former withholding rules which applied only for non-residents (the theory was that a non-resident will never bother to file here in California, so the State must grab enough to 'encourage' people to file and get back their withholding), you could file a form to declare that the withholding was too large; a smaller amount was more appropriate. The State would then agree to lower the withholding. The Application for Reduced Withholding will NOT be available for sellers in this circumstance. Source: http://www.wwlaw.com/calrpta.htm |