Penalties

Penalties stink especially when they can be completely avoided. Such is normally the case with the form 593 because of the reliance on the escrow company to properly report the information to the Franchise Tax Board.

You may be assessed penalties if:

• You do not file a tax return.
• You file your tax return late.
• The amount of withholding does not satisfy your tax liability.
• The seller/transferor must submit Form 593 before the close of the real estate transaction to prevent withholding on the transaction. After the real estate transaction has closed, amounts withheld may be recovered only by claiming the withholding as a credit on the appropriate year’s tax return.

Interest will be assessed on late withholding payments and is computed from the due date to the date paid.

The Franchise Tax Board assesses a penalty for failure to file complete, correct, and timely information returns.

The penalty is calculated per seller:

$50 if filed 1 to 30 days after the due date.
$110 if filed 31 days to 6 months after the due date.
$270 if filed more than 6 months after the due date.

If there is an intentional disregard of the requirement, the penalty can be the greater of $550 or 10% of the required withholding.