Legal Question in Tax Law in California
Escrow failed to Withhold FTB tax
I sold a property recently and the escrow company failed to
withhold the 3 1/3% tax for the Franchise Tax Board. Under
the Revenue and Taxation code 18661-18677, they are liable
for the tax plus a 10% penalty. Can I (1) pay the tax
myself by April 15; (2) let escrow pay the tax out of their
own pocket, and can they get it back from me in this case?
1 Answer from Attorneys
Re: Escrow failed to Withhold FTB tax
You are still responsible for any tax which you owe on the transaction. The tax code section provides a way for the government to collect at least some tax in a situation where you do not pay the tax due on the transaction. If the FTB asserts a penalty against you for underpayment of estimated tax, you should advise them of the error made by the escrow company.
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