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Have you ever sold a property in the U.S. and had FIRPTA withholding taken out?
If that’s the case, you might be wondering how to get that money back. Good news: it’s totally doable! Here’s a comprehensive yet friendly guide to help you claim your FIRPTA refund, step by step.
FIRPTA abbreviation represents Foreign Investment in Real Property Tax Act. This U.S. tax law requires that a percentage of the sale price of a property sold by a foreign investor be withheld to cover possible tax liabilities. Usually, this withholding is 15% of the sale price.
Think of FIRPTA withholding like a security deposit. It’s designed to make sure taxes are paid even if the seller doesn’t have a permanent U.S. tax presence. However, this amount isn’t necessarily what you will owe in taxes. If the withheld amount is more than what you actually owe, you can claim the excess back.! Let’s get started now!
Absolutely! FIRPTA withholding is designed to cover potential tax liabilities, but if it turns out that the amount withheld exceeds what you actually owe, you’re entitled to a refund. It’s like getting a little extra back from a security deposit if you didn’t damage the property.
The key is to accurately assess your tax liability and file the appropriate forms. If everything is in order, you should be able to get back any excess amount withheld.
FIRPTA withholding is calculated as a percentage of the sale price of the property. The standard rate is 15%. Here’s a simple example:
If your actual tax liability turns out to be less than $75,000, you can claim a refund for the difference.
Getting your FIRPTA refund involves a few straightforward steps. Let’s walk through them:
The first thing you’ll need to do is get all your paperwork together. This includes:
Having these documents ready will make the process a lot smoother. Think of it as your paperwork toolkit.
Form 8288-B, “Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests,” is the key form for requesting a reduction or elimination of the withholding. Here’s what you need to know:
Along with Form 8288-B, you will need to file your U.S. tax return for the year in which you sold the property. This return helps the IRS determine your actual tax liability. Here’s what you need to do:
Once you’ve submitted Form 8288-B and your tax return, the IRS will start processing your request. Here’s what to expect:
After processing, the IRS will send you an early refund for any amount of FIRPTA withholding that exceeds your actual tax liability. Here’s how it works:
The wait time for a FIRPTA refund can be a bit lengthy. Generally, it takes between 6 to 12 months from the time you submit your forms. It’s not the fastest process, but it’s worth it to get back any excess withholding.
During this waiting period, it’s a good idea to periodically check the status of your refund. If you haven’t received any updates or the process seems stalled, don’t hesitate to follow up with the IRS to make sure everything is moving along as it should.
Claiming back your FIRPTA withholding doesn’t have to be a hassle. By following these steps—you can get back any excess withholding you’re owed.
So, if you need a hand with your FIRPTA tax refund filing or have any questions about the process, FIRPTA Tax Returns is here to help. The team is ready to guide you through every step, ensuring you get the refund you deserve without any extra stress. Reach out to us today, and let’s get your refund on the way!
