Canadian trying to get refund from IRS on a flip

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Canadian trying to get refund from IRS on a flip

Shahriar K.
Homeowner · surrey, British Columbia · Member since 2013 · 98 posts · 8 votes

I started a discussion about the flip I did in Spokane WA, and I created a topic on that. I thought I would start a new topic on my challenges to get a refund back from IRS.
The short story is I bought a property in Nov 2014 and had it sold in Oct 2015, it was on the market for close to 3 month for sale. Anyway I was still able to make a few bucks on the flip but the reason the IRS took 10% of my sale price was because I was selling it to someone who was putting a tenant in the property, if it was owner occupied I wouldn't have had to worry about this issue( also if sale price was above $280,000 and was sold to owner occupied IRS would have taken %10 off).

right now I have started working with an accountant to get my money back. He is charging me $450 for getting the refund  and $150 for getting me a US tax number. I have to send him my purchase and sale paperwork, paperwork for everything I have spent on contractors and material. The only thing I am still trying to figure out is I don't think I can use my transportation cost as expense which I don't get why. I have to get my passport certified by Canadian passport office and send a copy over. I also have to declare how many days I have spent in USA in the past 3 years. 

So far that's all I have been asked and will update this post if there are anything else. If anyone else has the experience of what I am going through please post below and let me know if this sounds about right.

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
10y

If you've made a profit on a fix and flip in the US, you will have to file a tax return and you will have to pay tax on the profits.  That 10% sounds like withholding  from the sale.  Maybe there's something more complex going on, but you'll only get that money back if they've withheld more than the tax that's due.

The IRS doesn't care if the new buyers are buying it as a rental or are going to occupy it.   WIthholding may be different but the tax won't.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    10y

    If you've made a profit on a fix and flip in the US, you will have to file a tax return and you will have to pay tax on the profits.  That 10% sounds like withholding  from the sale.  Maybe there's something more complex going on, but you'll only get that money back if they've withheld more than the tax that's due.

    The IRS doesn't care if the new buyers are buying it as a rental or are going to occupy it.   WIthholding may be different but the tax won't.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    Agreed, that's a FIRPTA withholding, and has nothing to do with the buyer's use.  It's now 15%, as of a month or so ago.

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  • Shahriar K.
    OP
    Homeowner · surrey, British Columbia · Member since 2013 · 98 posts · 8 votes
    10y

    thats interesting, why did they tell me they were with holding the money because it was being sold and being used as rental. thank you for the info.

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  • Chad U.
    Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes
    10y

    You could have applied for a withholding certificate from the Internal Revenue Service prior to the sale.  In this case, they will only withhold the amount of tax actually owing to the IRS as opposed to the entire 10%.  This certificate needs to be completed by a certified accountant, but the only issue is that it sometimes takes months to get all the info gathered, submitted and received back from the IRS.   So oftentimes cannot be completed prior to the sale, especially if it is a short closing.  

    It's also advisable to apply for an ITIN right from the start if you plan on investing in US real estate as a foreign national, as they can take months to receive.

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