Celebrate Thanksgiving With Peace of Mind and a Filed FIRPTA Return

Thanksgiving

Thanksgiving is the season to pause, appreciate what we have, and enjoy time with family and friends. But if you are a foreign investor selling property in the U.S., your plate might be piled high with something less festive, FIRPTA tax paperwork.

While others are carving turkeys, you could be carving out time to deal with the 15 percent withholding rule. The good news is that with a little preparation and expert help, you can avoid tax-related headaches and focus on what truly matters this holiday season.

Understanding FIRPTA and Why It Exists

FIRPTA, short for the Foreign Investment in Real Property Tax Act, was created to ensure that foreign individuals or entities pay their fair share of taxes on real estate sold in the United States. Under this law, buyers must withhold 15 percent of the total sales price and send it to the IRS at closing.

This isn’t a fine or an extra tax, it’s a precaution. Once the seller files the appropriate tax return, any overpaid amount can be refunded. The problem arises when sellers don’t understand the timeline or miss critical steps, causing that money to remain with the IRS for months.

For anyone trying to wrap up a property sale before year-end, the delay can feel like waiting for Thanksgiving dinner while the turkey’s still frozen.

Thanksgiving Timing and FIRPTA Planning

Timing is everything, both for perfecting a meal and for filing under FIRPTA. Just as you wouldn’t wait until the morning of Thanksgiving to start cooking, you shouldn’t wait until closing to handle FIRPTA paperwork.

Here are some smart ways to plan ahead:

  • Apply early for a withholding certificate: Submitting Form 8288-B before closing can reduce or even eliminate the 15 percent withholding.
  • Estimate your tax liability correctly: Knowing your actual gain and tax obligation helps avoid overpayment.
  • Coordinate with your buyer and title company: They’re responsible for submitting the withheld funds to the IRS, so clear communication ensures accuracy.
  • Keep all documents organized: From purchase contracts to proof of residency, having everything in one place speeds up the process.
  • Hire a professional: A FIRPTA specialist or CPA can help you interpret rules, complete forms, and follow up with the IRS efficiently.

Taking care of these details in advance can save weeks, or even months, of frustration.

Avoiding the Common FIRPTA Mistakes That Spoil the Feast

Just like forgetting the cranberry sauce, certain oversights can ruin an otherwise smooth process. Here are a few frequent FIRPTA blunders that foreign sellers should watch out for:

  • Delaying the application for a withholding certificate – Waiting too long can cause unnecessary withholding and refund delays.
  • Incorrect or incomplete forms – Small errors on Forms 8288 or 8288-B can trigger processing setbacks.
  • Misunderstanding exemptions – Some transactions qualify for reduced withholding, especially if the property will be used as a residence under $300,000.
  • Overlooking refund timelines – It can take several months to receive a refund, and missing documentation only adds to the wait.
  • Assuming the closing agent handles it all – While they assist with logistics, the legal responsibility to file lies with the seller.

Think of it like preparing a holiday meal—everything runs smoothly when each ingredient is handled correctly and on time.