The IRS’s 1031 Exchange policy has prompted many real estate investors to take advantage of this tool in order to save over 35% in taxes on the sale of their investment properties. When owners leverage this strategy, it is important to file Form 593 in order to register their tax withholding with the IRS.
In Plenti Financial’s online 1031 exchange portal, the 593 document is automatically included in the process for applicable parties.
What is a 593 Form?
The IRS explains: “Withholding is required when California real estate is sold or transferred. The real estate escrow person (REEP) is required to notify buyers of withholding requirements, unless the buyer is a QI in a deferred exchange.”
Exceptions to Form 593
Real estate withholding is not required in the case that any of the following 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.
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.