In Escrow, need help quick! Do I have to fill out 593C form?

Question

Hi BP Family,OK here it goes; My wife and I are in escrow on our first flip in San Diego and the escrow company is asking us to fill out the 593-C form to withhold taxes on the sale of the house. It was my understanding that I only have to pay tax on the capital gain of the house and not the full amount. They aren't taking into account the difference of what expenses I had to flip the house. Do I just get raked over the coals now and pay the $17K in taxes and then get some of it back later when I do my taxes next year?I'm thinking I want to select the Individual 12.3% x Gain on Sale. Thoughts?Eric

Dylan Vargas · Answer

@Eric Traboulay Welcome! Read the fine print. You DO NOT have to have the title company withhold ANY taxes. There is a spot that says " i may expect or expect a loss" or something along those lines. As you and @Cody L. stated the Title company does not know your cost basis. I almost got roped into this on my first flip. Luckily a CPA was available and advised me otherwise. Good luck and keep us posted.

Cody L. · Answer

I can't help but to say that's f'ing gross.  The IRS tries to make private compaines into unpaid IRS agents and tax collectors.  Makes me sick.  The title company should NOT be holding back taxes from a sale.  They have NO clue what your cost basis is.  If you sell a house for $200k you might have got it for $1 and put $0 into it and made $200k, or you might have paid $150k for it, put in $60k, and are losing $10k.The title company doesn't know, and shouldn't care.   That's up to you to report at the end of the year.I hope this is just some disgusting california law and not something that's going to spread to other areas.   And people ask me why I live in CA but don't invest here.