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FIRPTA Withholding

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Have you ever come across the term “FIRPTA” if you are a foreign person selling US real estate? Or are you looking to buy US real estate owned by a foreign person? If so, here is what you need to know.
FIRPTA is a tax law that imposes U.S. income tax on foreign persons selling US real estate. Under FIRPTA, the sale of a US real property interest by a foreign person is subject to income tax withholding.

A difficulty often arises, however, for sellers that are a non-resident: tax withholdings, in some cases for substantial amounts, may be levied. The good news is that in many cases, we are able to 1. remove the withholding obligation in the first place or 2. if the tax is to be withheld, we can get this refunded after the transaction is complete. 

Do buyers need to do anything? Well, if you are buying US real estate from a foreign person, you are generally required to withhold 15% of the sale price (exceptions may apply). Failure to do so may result in penalties. You need to transmit the amount withheld along with Form 8288 within 20 days of the sale. In addition, Form 8288-A must be attached to Form 8288 for each foreign person subject to withholding. 

As a foreign transferor (seller), you are responsible to keep all parties informed about your tax status as well as the information needed for the filing. The next step is to timely file Form 8288/8288A, after which you will receive a copy of 8288A from the IRS to be used for income tax return in the year of sale. This may reduce, or eliminate your tax obligation in many cases. Yes, even if you are a foreign person, you are generally required to file an income tax return if you sold a US real estate property.

Here are some of the most common questions we get:

  • What should I do if the seller doesn’t have an SSN/TIN?
  • Is there a way to reduce (or entirely remove) the tax withholding required? Hint: in many cases, yes!
  • How to request a withholding certificate?
  • What is the IRS’s turnaround time? How quickly can this be done in general? 
  • What are the penalties and how to avoid them?

We are experienced in such filings and can guide you step by step on how to efficiently execute them. Simply reach out to us using the contact form below should you have any questions or need assistance. We will be happy to help. 


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