The Maine REW-5 form is a crucial document for any individual, firm, partnership, or other entities selling real property in Maine and seeking an exemption or reduction in the withholding of Maine income tax on the disposition of real property. This form facilitates the request for a withholding rate reduction or exemption in accordance with 36 M.R.S. §§ 5250-A(3)(B) & (4) and must be submitted to Maine Revenue Services at least five business days prior to the closing date. If you're planning to sell property in Maine and wish to reduce your tax withholding obligations, it's essential to fill out and submit the Maine REW-5 form promptly by clicking the button below.
Understanding the Maine REW-5 form is crucial for anyone engaging in the disposition of real property within the state, especially for non-residents. This form, officially known as the Request for Exemption or Reduction in Withholding of Maine Income Tax on the Disposition of Maine Real Property, serves as a critical tool for managing fiscal responsibilities associated with property transactions. As outlined by Maine Revenue Services, this document caters to a wide demographic including individuals, firms, partnerships, and other entities, aimed at facilitating a smoother process when dealing with real estate withholding tax obligations. Applicants are encouraged to submit their requests no fewer than five business days before the closing date, with an option to submit via email or fax for convenience. The form meticulously details personal information, property specifics, financial assessments of the property's acquisition and intended sale, plus an applicant's declaration under the penalties of perjury. Additionally, it introduces the opportunity to designate a representative through a Power of Attorney for those unable or preferring not to handle the process directly. The act of submitting this form can significantly impact the financial handling of a property’s sale, potentially exempting sellers from standard withholding rates or enabling a reduction based on specific criteria outlined by the State Tax Assessor, thus underlying its importance in the realm of Maine real estate transactions.
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: realestate.withholding@maine.gov
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 realestate.withholding@maine.gov 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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Filing the Maine REW-5 form is a crucial step for those looking to obtain an exemption or reduction from the withholding of Maine income tax upon the sale of real property in Maine. This process involves a detailed submission that requires accurate and complete information about the transaction and the parties involved. Below, a step-by-step guide is provided to assist in filling out the form, ensuring that applicants submit their request efficiently and correctly. This guide helps navigate through the various sections, ensuring that all necessary details are covered for a successful application.
After submitting the form, Maine Revenue Services may request further documentation before authorizing an exemption or reduction. Ensure all contact information provided is accurate to facilitate smooth communication. Properly completing and submitting the Maine REW-5 form is a significant step towards the successful management of withholding taxes on the disposition of real property for sellers.
Form REW-5 is used to request an exemption or a reduction in the withholding of Maine income tax on the sale or transfer of real property located in Maine. It serves sellers who are not residents of Maine but are required to pay income tax on the gains from the sale. The State Tax Assessor may issue a withholding certificate to reduce or eliminate withholding based on criteria such as no tax due on the gain or if the standard withholding amount exceeds the seller's maximum tax liability.
Any seller, including individuals, corporations, trusts, or any other entity selling Maine real property who, at the time of closing, is a nonresident of Maine, must file Form REW-5 to request reduced withholding or an exemption. This includes sellers who believe the sale of their property will not result in a taxable gain or when specific circumstances warrant a reduction in the standard tax withholding.
Form REW-5, along with any supporting documentation, should be emailed to realestate.withholding@maine.gov or faxed to (207) 624-5062. The form needs to be submitted to the Maine Revenue Services at least five business days prior to the property closing date. Mailing the form is an option, though it requires an additional 2-3 weeks for processing.
When submitting Form REW-5, sellers need to provide detailed information and, in some cases, documentation including:
Once submitted, Maine Revenue Services reviews the request. They may issue a certificate of no tax due or a reduced amount of tax to be withheld. The seller is notified of the decision. In some cases, additional documentation may be requested to support the application. It is important to respond promptly to any requests from Maine Revenue Services to avoid delays in the withholding certificate issuance.
Yes, sellers can designate a representative to handle their real estate withholding matters by completing the Representative Information and Power of Attorney sections on page 2 of Form REW-5. The designated representative will have the authority to receive confidential information and to discuss the seller’s tax records related to the form with Maine Revenue Services. A complete Form 2848-ME (Power of Attorney) is required for the representative to act on the seller's behalf.
Yes, there are situations where withholding is not required, such as when the property is subject to foreclosure and the consideration received for the property does not exceed the debt secured by the property. Additionally, if it is determined that no tax is due on the gain from the transfer, a withholding certificate for exemption may be issued. Sellers are advised to consult with Maine Revenue Services or a tax professional to understand if their sale qualifies for an exemption or reduction in withholding.
Filling out the Maine REW-5 form, which deals with the exemption or reduction of withholding of Maine income tax on the disposal of real property, is a crucial process for sellers. However, mistakes can be made that may impact the outcome of the application. Below are five common errors:
Incorrect or Incomplete Applicant Information: A frequent misstep is not providing all necessary applicant details. This includes the applicant's name, mailing address, SSN or EIN, and email address. Each field must be accurately filled out to avoid delays or rejections.
Failure to Specify Ownership Percentage: Occasionally, applicants either fail to indicate their percentage of ownership or provide incorrect information. It's important to ensure that the ownership percentage matches the records, especially if there are multiple sellers.
Overlooking Supporting Documentation: The form requires several pieces of supporting documentation depending on the method of acquisition (purchase, inheritance, or gift) and details of capital improvements or original closing costs. Missing or incomplete documentation can lead to unnecessary processing delays.
Miscalculating Allowable Closing Costs: Calculating allowable closing costs, both from the original purchase and the current sale, is a complex task that often results in errors. This includes incorrectly including non-qualifying costs or failing to provide sufficient proof of these costs.
Incorrect Reporting on Future Tax Returns: The form requires an indication of how the sale of the property will be reported on the seller's federal income tax return. Confusion or inaccuracies here can have significant implications for the seller’s tax responsibilities.
To mitigate these issues, the following precautions can be taken:
Before submission, double-check all applicant information for accuracy.
Review the percentage of ownership and ensure it’s correctly reflected in the form.
Organize and double-check all required supporting documents for the method of acquisition and improvements to the property.
Consult a professional to accurately calculate allowable closing costs.
Understand the tax implications of the property sale and how it should be reported to avoid future tax issues.
By taking these steps, applicants can avoid common mistakes and ensure a smoother processing of their Maine REW-5 form.
When dealing with real estate transactions in Maine, especially for nonresidents, it's crucial to understand that the Form REW-5 is just one of several documents that might be used to ensure a smooth and compliant process. This form, Request for Exemption or Reduction in Withholding of Maine Income Tax on the Disposition of Maine Real Property, is instrumental in mitigating immediate tax withholdings on the sale. However, various other forms and documents also play integral roles in real estate dealings, tax filings, and legal compliance.
Understanding how each of these documents interacts with the REW-5 form and the overall real estate transaction process is vital for anyone engaged in selling or buying property in Maine, particularly nonresidents. These documents ensure that all parties meet their legal obligations and that the transaction proceeds as smoothly as possible, minimizing potential legal and financial hurdles.
The HUD-1 Settlement Statement is a document similar to the Maine REW-5 form in that it provides detailed information about a real estate transaction. The HUD-1 outlines all the fees, charges, and the final financial transaction details between the buyer and seller in a real estate transaction. Both documents are critical in the closing process of selling property, with the main difference being that the Maine REW-5 form specifically relates to the request for exemption or reduction of income tax withholding on the sale of property, while the HUD-1 encompasses a broader overview of the closing costs and financial settlement.
The 1099-S form is another document with similarities to the Maine REW-5 form, as both are involved in the process of reporting real estate transactions. The 1099-S form is used to report proceeds from real estate transactions to the Internal Revenue Service (IRS), ensuring that all parties declare the correct income derived from the sale of property. By contrast, the Maine REW-5 form is specifically used to request a tax withholding exemption or reduction for the sale of Maine real estate, but both are essential for accurately reporting and taxing real estate transactions.
Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests, shares a purpose with the Maine REW-5 form in the realm of tax withholding on real estate transactions. Form 8288 is required for sales involving foreign sellers of U.S. property, ensuring that taxes are withheld and reported to the IRS. While Form 8288 focuses on the federal withholding requirements for foreign persons, the Maine REW-5 form addresses state-level withholding for both residents and nonresidents of Maine, providing a mechanism to apply for withholding adjustments based on the specifics of the sale.
The IRS Form 2848, Power of Attorney and Declaration of Representative, is related to the Maine REW-5 form through its provision for representing taxpayers. While Form 2848 allows taxpayers to authorize an individual to represent them before the IRS, the Maine REW-5 form includes sections for designating a representative for matters related to the withholding process of a real estate transaction in Maine. Both forms recognize the need for taxpayers to appoint trusted individuals to handle tax-related discussions and decisions on their behalf, specifying the extent of the representative's authority.
IRS Publication 523, Selling Your Home, is similar in nature to the explanatory sections of the Maine REW-5 form in that both provide vital information for individuals in the process of selling real estate. While Publication 523 offers comprehensive guidance on federal tax rules regarding the sale of a home, including exclusions and reporting of the sale, the Maine REW-5 form focuses on the specific process for requesting an exemption or reduction in state tax withholding for the sale of Maine property. Both are essential resources for sellers to understand their tax obligations and opportunities for reducing their tax burden in the context of a real estate transaction.
When filling out the Maine REW-5 form, it's important to get things right to ensure a smooth process in requesting an exemption or reduction in withholding of Maine income tax on the disposition of Maine real property. Here are some key dos and don'ts to keep in mind:
Things You Should Do:
Things You Shouldn't Do:
Adhering to these guidelines will help ensure that your request for an exemption or reduction in withholding of Maine income tax on the sale of real property is processed efficiently and effectively.
Understanding the Maine REW-5 Form can be challenging, and there are common misconceptions that can confuse applicants. It's important to clarify these misunderstandings to ensure a smooth process when requesting an exemption or reduction in withholding of Maine income tax on the disposition of Maine real property.
Misconception 1: The REW-5 form is only for residents of Maine.
This is incorrect. The form is specifically designed for non-residents of Maine or entities who are selling real property located in Maine. Its primary use is to request a reduction or an exemption from the state's income tax withholding on the sale of real property.
Misconception 2: Any reduction or exemption request will automatically be approved.
Approval is not automatic. The Maine Revenue Services (MRS) reviews each application and may request additional documentation before authorizing an exemption or a reduction in real estate tax withholding. The decision is based on the completeness and accuracy of the application and supporting documents.
Misconception 3: The application can be submitted at any time.
The form must be submitted no fewer than 5 business days prior to the closing date. This timeline is crucial to allow MRS sufficient time to review and process the request. If mailed, applicants should allow an additional 2-3 weeks for processing.
Misconception 4: Email and fax are the only submission methods.
While email and fax are recommended for faster processing, the document states that mailing is an acceptable method of submission as well. However, extra processing time should be considered when choosing to mail the application.
Misconception 5: A single form can be used for multiple sellers.
In cases where there are multiple sellers of the property, each seller must complete a separate Form REW-5. The only exception is for married taxpayers filing a joint Maine individual income tax return, who may complete one form listing both names.
Misconception 6: Closing costs and capital improvements are not important for the application.
On the contrary, accurately reporting allowable closing costs and capital improvements is essential. These figures play a critical role in the calculation for any reduction or exemption of withholding tax. Incorrect reporting can affect the outcome of your request.
Misconception 7: Designating a representative is the same as granting them Power of Attorney (POA).
While applicants can designate a representative to manage their real estate withholding process, this does not equate to giving them POA. A separate POA form (Form 2848-ME) must be completed and provided for the representative to act on the applicant's behalf. Signing the REW-5 does not automatically grant these powers.
Clarifying these misconceptions ensures that individuals and entities can navigate the process of requesting a Maine income tax withholding exemption or reduction on real property sales with greater confidence and accuracy.
Filing the Maine REW-5 form is an important process for individuals or entities involved in the sale of real property in Maine, particularly for nonresidents. Understanding the key takeaways can streamline the exemption or reduction in withholding of Maine income tax. Below are seven crucial points to remember:
This form plays a critical role in ensuring compliance with Maine's tax laws during property transactions, benefiting sellers by potentially reducing their tax liabilities. It is advisable for sellers to provide thorough and accurate information to facilitate a smooth processing experience.
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