The Maine REW-5 form is a crucial document for anyone looking to request an exemption or reduction in the withholding of Maine income tax when selling real property. This form is specifically designed for non-residents of Maine and must be submitted at least five business days before closing. To ensure a smooth transaction, it is essential to complete the REW-5 form accurately and submit it promptly.
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The Maine REW-5 form serves as a crucial tool for individuals and entities looking to navigate the complexities of income tax withholding on the sale of real property in Maine. Specifically designed for sellers who are nonresidents of the state, this form allows them to request an exemption or a reduction in the withholding of Maine income tax that would otherwise be applied at a standard rate of 2.5% on the total sales price. The process requires sellers to provide detailed information, including their ownership percentage, the property’s physical address, and the method by which they acquired the property—whether through purchase, inheritance, or gift. Additionally, the form prompts sellers to disclose any capital improvements made to the property and the estimated closing costs associated with the sale. It is essential to submit the REW-5 form at least five business days before the closing date to allow for proper processing. Sellers must also be prepared to provide supporting documentation, as Maine Revenue Services may request additional information before granting any exemptions or reductions. Understanding these key aspects can significantly ease the burden of tax withholding during real estate transactions in Maine.
2022 Form REW-5
Request for Exemption or Reduction in Withholding of Maine Income Tax on the Disposition of Maine Real Property
Maine Revenue Services
Income/Estate Tax Division - REW
Tel. 207-626-8473 Fax 207-624-5062
Email: [email protected]
If possible, submit via email or fax.
P.O. Box 1060
Augusta, ME 04332-1060
Note: This form is for sales occuring in 2022; submissions filed on a prior year form may be subject to delay. This form must
be submitted no fewer than 5 business days prior to closing. If mailed, please allow an additional 2-3 weeks for processing.
Applicant’s name (include spouse’s name, if applicable): _________________________________________________
Mailing address: ________________________________________________________________________________
SSN(s) or federal EIN:_________________________________ Daytime phone number: ______________________
Applicant’s email address : ________________________________________________________________________
Applicant’s percentage of ownership (See instructions):______________ %
1.Names of all sellers: __________________________________________________________________________
2.Buyer(s) name(s): ____________________________________________________________________________
3.Physical address: ________________________________________ Municipality/Township: _________________
Note: Attach documentation to verify the costs listed in the section below. Do not send original documents or receipts by mail, as they will not be returned. Maine Revenue Services (“MRS”) may request additional documentation prior to authorizing this request.
4.
Date property acquired by seller: _______________
5.
Method of acquisition/Proof of purchase price:
Amount: $ _________________
a)
Purchase (see instructions).
b)
Inherited (see instructions).
Decedent’s name: ____________________ SSN:_________________ Date of death:______________
c) Gift or other (see instructions).
6.Applicant’s allowable closing costs from original purchase of property (See instructions): $ ___________________
7.Capital improvements (see instructions): $_________________________________________________________
8.Total sales price and closing date of current pending sale: $ ________________ 8a. Date: __________________
9.Applicant’s estimated allowable current closing costs (see instructions): $ ______________
10.If rental/commercial use during ownership, length of time: Years: ________________ Months: _______________
Provide allowed or allowable accumulated depreciation. $ ____________________________________________
11.How will this sale of real property be reported on the seller’s federal income tax return? (See instructions.)
__________________________________________________________________________________________
Under penalties of perjury, I declare that I have examined this application and attached schedules and statements, and to the best of my knowledge and belief they are true, correct and complete. If you are signing on behalf of the seller(s), you must provide a written power of attorney authorization with this request. To assign a designated representative, complete the Representative Information and Power of Attorney on page 2. You must sign the authorization on page 2 or complete Form 2848-ME (available at www.maine.gov/revenue/tax-return-forms/general-forms) before MRS can speak with your designated representative. If you are signing on behalf of your employer, include authorization.
Applicant’s signature: ______________________________________________ Date: ________________________
Print name: _____________________________________________________________________________________
This request for a withholding rate reduction or exemption is submitted in accordance with 36 M.R.S. §§ 5250-A(3)(B) and (4), which authorizes the State Tax Assessor to issue a certificate of exemption or reduction in the amount of tax to
be withheld. The rate of withholding is 2.5% of the total consideration or, at the request of the seller, the State Tax
Assessor may authorize a reduced amount of withholding equal to the gain multiplied by 7.15% for individuals or 8.93% for a C corporation, in calendar year 2022.
Revised: December 2021
Representative Information (complete only if you want someone to represent you during the real estate withholding process)
Representative name (and title, if applicable)
Firm or company name
Mailing address
City, state, zip
Country (if not United States)
Email address
Telephone number
Limited Power of Attorney (complete only if you want someone to represent you during the real estate withholding process)
By signing below, the selling party appoints the individual named in the above section to act as their representative with authority to receive confidential information and to discuss your tax records, related to this form, with MRS. I understand
that my representative may not act on my behalf, unless I provide a Form 2848-ME, Power of Attorney. I also understand that signing this form does not revoke other power of attorney forms on file with MRS.
Seller signature
Print name (and title, if applicable)
Date
Additional seller signature (if applicable)
General Instructions
Purpose of Form: To request an exemption or reduction in withholding of Maine income tax on the disposition of Maine real property.
Who may File: A seller (individual, firm, partnership, association, society, club, corporation, estate, trust, business trust, receiver, assignee or any other group or combination acting as a unit) of Maine real property who, at the time of closing, is a nonresident of Maine.
Withholding Certificate Issued by the State Tax Assessor: A withholding certificate may be issued by the
State Tax Assessor to reduce or eliminate withholding on transfers of Maine real property interests by nonresidents.
The certificate may be issued if:
1.No tax is due on the gain from the transfer; or,
2.Reduced withholding is appropriate because the 2.5% amount exceeds the seller’s maximum Maine income tax liability on the gain realized from the sale. The maximum income tax liability is equal to the seller’s capital gain multiplied by 7.15% (8.93% for corporations).
If one of the above is applicable, apply for the certificate no later than five business days prior to closing. Do not apply if
the maximum Maine income tax liability exceeds 2.5% of the consideration.
Foreclosure Sale: If property is subject to foreclosure and the consideration received for the property does not exceed the debt secured by that property, no Maine income tax withholding is required. Foreclosure sale means a sale of real property incident to a foreclosure and includes a mortgagee’s sale of real estate owned property of which the mortgagee, or third-party entity, retained or took ownership as the result of an unsuccessful attempt to sell the property at the time
of a previous foreclosure auction. MRS does not issue withholding exemption certificates for this type of foreclosure
sale (see Rule 803 and 36 M.R.S. § 5250-A(3-A)).
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Specific Instructions
Email Form REW-5 and all supporting documents to [email protected] or fax to (207) 624-5062.
Applicant’s name: Enter the applicant’s (seller’s) name.
NOTE: If there are multiple sellers of the property, each
applicant (seller) must complete a separate Form REW-
5, except that married taxpayers that will file a joint Maine individual income tax return requesting a withholding exemption or reduction may complete one form, listing both names and SSN’s on the form.
Mailing address: Enter the applicant’s current mailing address.
Social Security Number (SSN) or Employer Identification
Number (EIN): Enter the SSN or EIN of the applicant listed on this form. If applicable, enter your spouse’s SSN.
E-mail address: Provide the applicant’s email address, or the email address of the applicant’s Power of Attorney (POA). If using the POA’s email, be sure to include page 2 of Form REW-5 or a properly completed Form 2848-ME.
Line 1. If applicant’s ownership percentage is less than 100%, all sellers must be listed on this line. The seller(s) are typically listed on the Purchase and Sale Agreement. Attach additional pages, if necessary.
Line 2. Enter the names(s) of the buyer(s). The buyers are typically listed on the Purchase and Sale Agreement. Attach additional pages, if necessary.
Line 3. Enter the physical address of the property being sold.
Line 4. Enter the date the seller acquired the property.
Line 5. Indicate the method by which the seller obtained ownership of the property.
a)If you purchased the property, attach verification of the original sales price, such as HUD-1, dually signed Purchase and Sales Agreement, original Real Estate Transfer Tax Declaration (RETTD) or tax assessment from the town when purchased. If you purchased land and built a home, provide proof of the purchase price of the land only.
b)If you inherited the property, provide a complete appraisal dated within six months of the decedent’s death or a copy of the tax assessment from the town. Enter the decedent’s name, SSN and the date of death in the spaces provided.
c)If you received the property as a gift, provide documents to verify the original purchase price paid by the previous owner. If you cannot locate these documents, the town where the property is located may have a record of the purchase price. As a general rule, for purposes of determining the gain, you will use the donor’s adjusted basis at the time of gift as your basis.
Line 6. Enter the amount of the allowable original closing costs you paid at the time of acquisition*. Also see line 9.
Line 7. Provide a list of capital improvements made to the home along with the cost of each improvement. Do
not include repairs made to the property. For example:
Cleaning or fixing a furnace is not a capital improvement, but installing a new furnace is. If you built the home, provide the information for the build. You can make a detailed list of the items purchased (including the cost of each and providing
receipts), provide a copy of the contract with the builder, provide the building permit filed with the town, or provide the tax assessment from the year you received the certification
of occupancy. Attach additional pages as needed.
Line 8. Enter the total gross sales price of the property. Do not subtract any fees. The sale price should match the sales price on the Purchase and Sales Agreement. If there are multiple sellers, list this seller’s ownership percentage.
Line 8a. Enter the closing date for the sale of this property.
Line 9. Enter the amount of the applicant’s allowable closing costs from the current sale of this property*. Also see line 6.
*Certain closing costs do not qualify. If available, enclose a copy of the HUD-1 or Closing Statement from when you purchased the property. Closing costs generally include realtor fees, transfer taxes, and deed preparation fees.
For more information about selling your home, determining basis, reporting the sale, capital improvements and costs, see IRS Publication 523.
Line 10. If the property was rented or used commercially, enter the allowed, or allowable, accumulated depreciation determined in accordance with the Internal Revenue Code.
Line 11. Indicate whether the sale will be reported as a gain, loss, exclusion, installment sale or like-kind exchange. If you do not know if the sale will result in a loss or a gain, leave this line blank.
Representative Information & Limited Power of Attorney
Although not required, you may designate someone to represent you during the real estate withholding process. To do so, complete the Representative Information and Limited Power of Attorney sections on page 2 of Form REW-5. The
designated representative must be an individual, although a firm cannot be designated as your representative, an individual of a firm can be.
Appointing a Limited Power of Attorney designates a representative to receive confidential information and to discuss tax records related to your Form REW-5 filed
with MRS. The designated representative may not act on your behalf, unless a completed Form 2848-ME (Power of Attorney) is provided.
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Completing the Maine REW-5 form is an important step for sellers of Maine real property seeking an exemption or reduction in withholding of Maine income tax. After filling out this form, you will need to submit it to Maine Revenue Services along with any required documentation. Remember, submitting the form at least five business days before closing is crucial to ensure timely processing.
Once you have completed all sections of the form, ensure that you have included any necessary supporting documents. Submit the form via email or fax, or mail it to the appropriate address. Remember to keep a copy for your records.
The Maine REW 5 form is used to request an exemption or reduction in the withholding of Maine income tax when selling real property in Maine. This form is particularly relevant for sellers who are nonresidents of Maine at the time of the closing.
Any seller of Maine real property who is a nonresident at the time of closing can file this form. This includes individuals, partnerships, corporations, estates, and other entities. If there are multiple sellers, each must complete a separate form, unless they are married and filing jointly.
The form must be submitted no fewer than five business days prior to the closing date. If the form is mailed, it is advisable to allow an additional 2-3 weeks for processing.
The form requires various pieces of information, including:
The standard withholding rate is 2.5% of the total consideration from the sale. However, sellers may request a reduced withholding amount based on their estimated tax liability, which can be calculated using specific percentages depending on their situation.
Maine Revenue Services may request additional documentation to support the request for exemption or reduction. This could include proof of the original purchase price, closing costs, or evidence of capital improvements made to the property.
Yes, you can designate a representative to act on your behalf during the withholding process. This is done by completing the Representative Information and Power of Attorney sections of the form. The representative must be an individual, and a completed Form 2848-ME is required for them to act on your behalf.
If the property is in foreclosure and the consideration received does not exceed the debt secured by the property, no Maine income tax withholding is required. However, Maine Revenue Services does not issue withholding exemption certificates for foreclosure sales.
The seller must indicate how the sale will be reported on their federal income tax return. This could be as a gain, loss, exclusion, installment sale, or like-kind exchange. If uncertain, this line can be left blank.
The completed form can be submitted via email to [email protected] or faxed to (207) 624-5062. If submitting by mail, send it to the Maine Revenue Services at P.O. Box 1060, Augusta, ME 04332-1060.
Incomplete Applicant Information: One common mistake is failing to provide complete details for the applicant, including the spouse’s name if applicable. All required fields, such as mailing address and Social Security Number (SSN) or Employer Identification Number (EIN), must be filled out accurately.
Missing Signatures: Another frequent error involves neglecting to sign the application. The form requires the applicant’s signature, and without it, the request cannot be processed.
Incorrect Property Details: Providing inaccurate information about the property can lead to complications. Ensure that the map, block, lot, and sub-lot numbers, as well as the physical address, are correct and match the Purchase and Sale Agreement.
Failure to Attach Required Documentation: Applicants often forget to include necessary supporting documents. For instance, proof of purchase price or evidence of capital improvements must accompany the form for it to be valid.
Not Submitting on Time: Submitting the form less than five business days before closing is a significant mistake. To avoid delays, it’s essential to plan ahead and submit the request well in advance.
Ignoring Power of Attorney Requirements: If someone is signing on behalf of the seller, they must provide a written power of attorney. Many overlook this requirement, which can hinder the processing of the form.
When dealing with the Maine REW-5 form, several other documents and forms may also be necessary to ensure a smooth transaction. Each of these documents serves a specific purpose in the process of requesting an exemption or reduction in withholding of Maine income tax on real estate transactions. Here’s a brief overview of some of the most commonly used forms alongside the REW-5.
Understanding these additional forms can significantly ease the process of completing the Maine REW-5 form. Each document plays a vital role in ensuring that all necessary information is provided accurately, which can help avoid delays or complications in the transaction.
The Maine REW-5 form is similar to the IRS Form 8288, which is used for withholding tax on dispositions of U.S. real property interests by foreign persons. Both forms serve to ensure that tax obligations are met during real estate transactions. While the REW-5 focuses on Maine income tax withholding, Form 8288 addresses federal withholding requirements. Each form requires the seller to provide detailed information about the property, the transaction, and their tax identification, ensuring compliance with tax regulations at different jurisdictional levels.
Another comparable document is the California Form 593, which is the Real Estate Withholding Tax Statement. Like the REW-5, this form is used to request a reduction or exemption from withholding for state income taxes on real estate sales. Both forms require similar information about the seller, the buyer, and the property being sold. They aim to protect the state’s revenue while providing sellers the opportunity to reduce their withholding based on their tax liability.
The New York State Form IT-2663 is also analogous to the Maine REW-5 form. This form is utilized for withholding tax on the sale of real property by nonresidents. Both forms require sellers to declare their ownership percentage, provide property details, and submit supporting documentation. They facilitate the state’s ability to collect taxes while allowing sellers to apply for a withholding exemption based on specific criteria related to their tax situation.
In Florida, the Form DR-219 serves a similar purpose. This document is used for real estate withholding tax on nonresidents selling property in Florida. Like the REW-5, it requires information about the seller and the property, as well as the method of acquisition. Both forms aim to ensure that tax obligations are fulfilled, while allowing sellers to request a reduction or exemption based on their unique circumstances.
The Illinois Form CRT-1 is another document that resembles the Maine REW-5 form. This form is used to request a certificate of exemption from the withholding of income tax on the sale of real property. Both forms require detailed information about the property and the seller’s tax status. They provide a structured process for sellers to navigate their tax obligations while ensuring that state tax authorities can effectively manage revenue collection.
Similar to the REW-5, the Massachusetts Form 1-3 is used for withholding tax on the sale of real estate by nonresidents. This form requires sellers to provide personal information, property details, and the reason for requesting a withholding exemption. Both forms serve to protect state tax revenues while offering a means for sellers to demonstrate that they do not owe taxes on the gains from the sale.
The Texas Form 50-284 is also comparable to the Maine REW-5 form. This document is used for reporting the sale of real property and withholding tax obligations. Both forms require information about the seller and the transaction, ensuring that tax liabilities are addressed. They allow sellers to submit requests for exemptions based on their specific financial situations, thereby facilitating compliance with state tax regulations.
The New Jersey Form GIT/REP-3 is another similar document. This form is used to report the sale of real property and the associated withholding tax for nonresidents. Much like the REW-5, it requires sellers to detail their ownership interest and provide information about the property being sold. Both forms aim to streamline the process of tax withholding while ensuring that states can collect necessary revenue from real estate transactions.
Lastly, the Virginia Form P-2 is akin to the Maine REW-5 form. This form is used for withholding tax on the sale of real estate by nonresidents. Both forms ask for detailed information about the seller, the buyer, and the property, allowing for a thorough assessment of tax obligations. They provide a mechanism for sellers to request exemptions or reductions based on their tax liabilities, ensuring compliance with state tax laws.
When filling out the Maine REW-5 form, it is crucial to follow specific guidelines to ensure the process runs smoothly. Below is a list of things to do and avoid:
Misconceptions about the Maine REW 5 form can lead to confusion and delays in processing. Below are seven common misconceptions, along with clarifications for each.
Understanding these misconceptions can help ensure that the REW 5 form is completed accurately and submitted on time, facilitating a smoother transaction process.
When dealing with the Maine REW-5 form, understanding its purpose and requirements is essential for a smooth transaction. Here are some key takeaways to keep in mind:
Understanding these key points can help ensure that the process goes smoothly and that you meet all necessary requirements when selling real property in Maine.