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California withholding on sale of Real Estate

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G

gapdev

Junior Member
What is the name of your state? California

My siblings and I are selling the house we inherited from our father. My brother and I are California residents and my sister is a resident of Hawaii.

The Escrow office insists that my sister must fill out Form 593-C and have the 3.3% California Tax withheld from her share of the proceeds.

Since this is a California Income Tax that is being withheld, is it proper to force my sister to pay this tax when she is not a resident of California?

If there is nothing we can do to stop this, how does my sister get her money back and pay her taxes in Hawaii?

Thanks much for any insights you can share,

KennyWhat is the name of your state?
 


T

tecate

Member
It is proper. Proceeds from the sale of California realty is California source income, and reportable by her on a California nonresident return. The 3 1\3% is only a deposit, similar to withholding on wages. The actual tax, if any, is calculated on the 540NR, based on the gain or loss. Hawaii may have a credit against the California tax to lessen or eliminate double taxation.
 
FlyingRon

FlyingRon

Senior Member
Yes, anytime you have income issues like this, it may become advantage to have a professional fill out your forms that year (like a CPA not H&R BLOCKHEADS). I did my taxes for years and wrangled through the partial year stuff when I moved, but I finally gave up on out-of-state property sales.
 
A

abezon

Senior Member
FlyingRon said:
Yes, anytime you have income issues like this, it may become advantage to have a professional fill out your forms that year (like a CPA not H&R BLOCKHEADS). I did my taxes for years and wrangled through the partial year stuff when I moved, but I finally gave up on out-of-state property sales.
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Ron, there are some d*mn good tax pros at H&R Block, & a whole lot of idiot CPAs. There are also lots of new preparers who start out thinking tax prep is easy money, find out the truth, & decide this isn't the career for them. HR Block is half the price of a CPA and I believe genereally a better choice for individuals, as CPAs tend to specialize in more challenging corporate, estate, & partnership returns, which means they often know less about recent changes to the good ol' 1040/540.

If you go to Block in Hawaii, simply ask for an enrolled agent with at least 3 years' experience & you'll weed yourself out of the newbie pool. Frankly, there's nothing difficult about your sister's CA return. The only challenge will be getting the basis of the inherited house correct. (The estate executor should be able to help with that.) If the house sale happened soon after dad's death, the costs of sale likely produced a capital loss. If she files her CA return early, she'll have the refund in time to pay HI any taxes owed.
 
I

irsos

Member
abezon said:
Ron, there are some d*mn good tax pros at H&R Block, & a whole lot of idiot CPAs. There are also lots of new preparers who start out thinking tax prep is easy money, find out the truth, & decide this isn't the career for them. HR Block is half the price of a CPA and I believe genereally a better choice for individuals, as CPAs tend to specialize in more challenging corporate, estate, & partnership returns, which means they often know less about recent changes to the good ol' 1040/540. QUOTE]

The average CPA's rates are not much different from HRB. Furthermore, if a CPA specializes in business returns then that is where their continuing education (CE) will focus. If they specialize in individual returns then their CE will be in that area. All CPA's I know who prepare individual returns attend at least one CE class per year that addresses recent tax law changes - in addition to any other professional reading they may do on the subject.
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LdiJ

LdiJ

Senior Member
abezon said:
Ron, there are some d*mn good tax pros at H&R Block, & a whole lot of idiot CPAs. There are also lots of new preparers who start out thinking tax prep is easy money, find out the truth, & decide this isn't the career for them. HR Block is half the price of a CPA and I believe genereally a better choice for individuals, as CPAs tend to specialize in more challenging corporate, estate, & partnership returns, which means they often know less about recent changes to the good ol' 1040/540.

If you go to Block in Hawaii, simply ask for an enrolled agent with at least 3 years' experience & you'll weed yourself out of the newbie pool. Frankly, there's nothing difficult about your sister's CA return. The only challenge will be getting the basis of the inherited house correct. (The estate executor should be able to help with that.) If the house sale happened soon after dad's death, the costs of sale likely produced a capital loss. If she files her CA return early, she'll have the refund in time to pay HI any taxes owed.
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I absolutely agree that a CPA could actually be less experienced in individual tax than than an EA, or even a non EA with lots of years of experience.

A local tax office, that is open all year long, generally tends to have a greater number of experienced staff than an office that is only open during the tax season.
 
A

abezon

Senior Member
irsos said:
The average CPA's rates are not much different from HRB.
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CPAs must be a lot cheaper in Houston. :) In my neck of the woods, the average CPA is about twice the cost of HRB. Throw in anything international & a CPA costs 3-10 times as much as an EA at HRB. (One CPA firm wanted to charge $1,000 for a Form 3115 reporting a foreign cash gift. It's one frickin' page, most of which is skipped!)
 
I

irsos

Member
abezon said:
CPAs must be a lot cheaper in Houston. :) In my neck of the woods, the average CPA is about twice the cost of HRB. Throw in anything international & a CPA costs 3-10 times as much as an EA at HRB. (One CPA firm wanted to charge $1,000 for a Form 3115 reporting a foreign cash gift. It's one frickin' page, most of which is skipped!)
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If I had to use a form designed to report a change in accounting method to deal with a foreign gift, I would charge $1,000 too.

I did not say Price Waterhouse, my former firm, was about the same as HRB, I said your average CPA. I am talking about the cost to prepare the average US personal income tax return. I have prepared dozens and dozens of returns where HRB had prepared the previous return and it is a myth they are a lot cheaper, especially when you include the ridiculous fees they charge for EF and RAL's.

I do have a minimum fee, so the cost of a return for a single person with one W-2 may be higher than HRB, but if you include a Sch. A and C and a Sch D with a dozen transactions - I can assure you HRB will be up there with the average CPA.
 
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LdiJ

LdiJ

Senior Member
irsos said:
If I had to use a form designed to report a change in accounting method to deal with a foreign gift, I would charge $1,000 too.

I did not say Price Waterhouse, my former firm, was about the same as HRB, I said your average CPA. I am talking about the cost to prepare the average US personal income tax return. I have prepared dozens and dozens of returns where HRB had prepared the previous return and it is a myth they are a lot cheaper, especially when you include the ridiculous fees they charge for EF and RAL's.

I do have a minimum fee, so the cost of a return for a single person with one W-2 may be higher than HRB, but if you include a Sch. A and C and a Sch D with a dozen transactions - I can assure you HRB will be up there with the average CPA.
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Not in my area...The majority of CPA's are considerably more expensive than HRB (although there are a handful that aren't). Our firm is significantly less expensive than HRB, but we use fantastic software that allows us to do returns very quickly. With our software I can do a simple return with a couple of W2s in less than 10 minutes, and something as complicated as an 1120S in 30 minutes if the client is relatively well organized. I really love our software, I was hooked within a week of using it for the first time.

I have a current client who was paying a CPA 1200.00 a year for an easy 1120S that I can do for 200.00.
 
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