Form 593: Report 1031 Withholding on Your Tax Return
Discover the process of reporting tax withholdings on real estate sales in California using Form 593.
The utilization of the IRS's 1031 Exchange policy has motivated numerous real estate investors to utilize this tool for saving over 35% in taxes on the sale of their investment properties. To comply with this strategy, owners need to file Form 593 to register their tax withholding with the IRS.
In Elevated's online 1031 exchange portal, the 593 document is automatically included for relevant parties.
What is a 593 Form?
According to the IRS, withholding is mandatory when California real estate is sold or transferred. The real estate escrow person (REEP) must inform buyers of the withholding requirements, except when the buyer is a Qualified Intermediary (QI) in a deferred exchange.
Exceptions to Form 593
Real estate withholding is not mandatory if any of the following conditions apply:
• The sale price is $100,000 or less.
• The property is in foreclosure.
• The transferor is a bank acting as a trustee (except for a deed of trust).
• The seller or transferor certifies to an exemption on Form 593, Part III.
Conclusion
For more information on this, the IRS directs investors to read their publication FTB Publication 2016: Real Estate Withholding Guidelines.
You can download and review Form 593 here.
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