Friday, April 12, 2019 / by Nicole Solari
Federal and California Withholding- What You Need To Know
Federal Withholding and Nonforeign Affidavit
There are 3 major exemptions to FIRPTA:
- Seller furnishes buyer a “nonforeign status affidavit” containing the seller’s tax identification number or social security number (CAR form AS or equivalent);
- The property sales price is no more than $300,000, and the buyer or a member of buyer’s family intends to use the property as a personal residence for at least 50% of the time during the first two years; or
- IRS issues a withholding certificate to the foreign seller.
As a default under the purchase contract, the seller is obligated to deliver the AS or QS form within seven days after acceptance to escrow if they have agreed to be the qualified substitute, or to the buyer. Failure to do so will render the seller in breach of the CAR purchase agreement.
CA has the following state specific exemptions for buyer withholding:
- The property sales price is no more than $100,000;
- The sale of an individual’s principal residence or property last used as a principal residence;
- The sale of a decedent’s principal property by the estate;
- The sale of property by corporation with a permanent place of business in CA;
- A 1031 exchange;
- An involuntary conversion under IRC section 1033;
- The sale of property at a net loss; or
- seller's tax liability, calculated at the maximum rate (currently 12.3%) on the taxable gain, regardless of seller's actual rate, will be less than 3 1/3%of the gross proceeds and seller certifies that fact under penalty of perjury.