Get The Facts On When To Submit The FIRPTA Withholding Application

One of the biggest hang ups foreign nationals have about selling their U.S. properties is FIRPTA—short for the Foreign Investment in Property Tax—which is levied on the gross sales price of most U.S. properties sold by non-U.S. citizens. Fortunately, by submitting your FIRPTA Withholding Application in a timely manner, you can ease this burden somewhat by more quickly regaining any return of the proceeds that exceeds the actual tax liability. Here is what you need to know.

How FIRPTA Works

In transactions governed by FIRPTA, the buyer must withhold either 10 or 15 percent of the proceeds (depending on the gross amount) and submit them to the IRS. Typically, this requirement is handled by the closing agent responsible for disbursing the closing funds. The withheld funds must usually be sent to the IRS within 20 days of closing, and pending their approval, the seller can expect to get any excess funds back through a tax refund the following year after filing a U.S. tax return.

However, rather than wait a year to get back your money, you can submit a “Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests,” or “8288-B Application” for short, which speeds up this process significantly—provided you complete and file the application in a timely manner.

How a Carefully Timed FIRPTA Withholding Application Works

When it comes to almost any tax related matter, timing is of the utmost importance: while you need to submit the certificate as soon as possible to get your funds more quickly, you also cannot do so earlier than tax regulations allow. In the case of the 8288 FIRPTA Withholding Application, there must be an executed real estate contract before you can submit to the IRS, which must be done on or before the closing date on the contract. If the application has not been sent by the time the transaction closes, then the filing will be considered untimely and the withholding agent must transfer the applicable proceeds to the IRS within the usual 20 days after closing.

Thus, communication is a key component to ensuring a timely and successful application. You or your agent should inform the buyer and the closing agent early on that a FIRPTA Withholding Application will be made. Otherwise the withholding agent will hold the funds only for a certain number of days before sending them to the IRS without your knowledge, since they did not realize an 8288B Application was being made—meaning you will have to wait the full year before getting your due proceeds back.

How Our Team Can Help With Your FIRPTA Withholding Application

Jurado & Farshchian, P.L. offers a globally-connected team of real estate attorneys with experience helping sellers from around the world handle FIRPTA closings, including completing a FIRPTA Withholding Application. We can also serve as the closing and escrow agent, keeping all parties in the loop while making sure that the IRS regulations are followed with the utmost efficiency and timeliness. We will help further the closing along while doing our best to ensure a quick return of your funds.

If you are a Realtor or seller involved in a FIRPTA transaction, please contact me at 305-921-0440 or email me directly at [email protected].

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