REALTORS WIN CHANGE IN LAW REGARDING DISCLOSURE OF SOCIAL SECURITY NUMBERS
REAL ESTATE LEGISLATION, REAL ESTATE PRACTICE, SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS
August 2nd, 2008
President Bush signed legislation this week eliminating the requirement that real estate agents obtain the seller’s Social Security Number and provide it to the buyer of their real property. Prior to this bill being signed, IRC SECTION 1445 required real estate agents to have the seller complete a form known as “SELLER’S AFFIDAVIT OF NONFOREIGN STATUS AND/OR CALIFORNIA WITHHOLDING EXEMPTION” ( C.A.R. Form AS) which included a blank for the seller to provide their SOCIAL SECURITY NUMBER. Once completed, the form is provided to the buyer and the buyer must sign the form acknowledging receipt of this sensitive information. REALTORS have lobbied the federal government for years to eliminate this requirement due to increasing cases of identity theft. The law change exempts agents from collecting this information as long as the information is collected by the escrow company handling the transaction. The escrow company would not give this information to the buyer unless the seller failed to pay taxes owed as a result of the real property sale. Ironically, our government can pursue the buyer of real property if the seller skips out on paying income taxes triggered by the buyer purchasing the seller’s property. That is why this private information was required to be provided to the buyer in the first place. I guess the government believed providing the buyer with the seller’s Social Security Number will aid the buyer in tracking the seller down!
Despite this change, sellers must still disclose if they are a nonresident alien for federal withholding tax purposes. Foreigners are required to have 10% of the sales price withheld for income tax liability. The escrow company is responsible for withholding this money and forwarding it to the IRS. If all the tax collected is not owed, the seller can receive a tax refund after filing their Federal Tax Return. Of course, if additional tax is owed as a result of the property sale, the seller is expected to include that sum with the tax return.
California also requires a withholding in certain circumstances of 3 1/3% of the sales price for investment properties. This same form ,AS, asks sellers to review the withholding exemptions to determine if no withholding is necessary. Common exemptions include the real property in question being the seller’s principal residence, sale results in a zero gain to seller or the property is being used in a tax-deferred 1031 Exchange. If you have any specific questions regarding these law changes don’t hesitate to give me a call.
Brad Garbutt
REALTOR/BROKER
REAL ESTATE PROFESSIONALS GMAC
(530)941-7492 or (530) 224-6767
25 years local experience
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