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But did you know you can often apply for a FIRPTA withholding tax refund?
Here’s everything you need to know about FIRPTA withholding, FIRPTA refunds, and FIRPTA withholding exemptions.
Under FIRPTA, buyers of U.S. real property must withhold a percentage of the sales proceeds when the seller is a foreign individual or entity. This withholding ensures that the IRS collects taxes on the gain from the property sale. Here’s a breakdown of FIRPTA withholding
The U.S. government implemented FIRPTA to ensure foreign sellers meet their tax obligations on U.S.-sourced income, including real estate gains. While the withholding might seem steep, it’s not necessarily the final tax amount. Foreign sellers can apply for a FIRPTA refund if they overpay.
Foreign sellers must file a U.S. tax return (Form 1040-NR or Form 1120-F) to calculate their actual tax liability. If the withheld amount exceeds your liability, you’re entitled to a refund.
An Individual Taxpayer Identification Number (ITIN) is essential for filing tax documents and requesting refunds. If you don’t already have one, apply using Form W-7.
Include the following documents when filing for a FIRPTA refund
● Completed U.S. tax return
● Copy of the closing statement from the property sale
● Proof of FIRPTA withholding (Form 8288-A)
Not all property sales require FIRPTA withholding. In certain scenarios, sellers can apply for a withholding certificate to reduce or eliminate the withholding amount.
Properties sold for $300,000 or less qualify if the buyer intends to use the property as a residence.
If the actual tax owed is less than the withholding amount, you can apply for a reduced rate by submitting Form 8288-B before the sale.
If there’s no taxable gain on the sale, a withholding exemption may apply.
To request an exemption or reduced withholding, submit Form 8288-B to the IRS. It’s crucial to file this form as early as possible, ideally before the property sale closes.
The timeline for FIRPTA refunds varies but generally takes 3–6 months after filing the required documents. Delays can occur if there are errors or missing information.
Buyers are responsible for withholding and remitting the tax to the IRS. Failure to comply can result in penalties for the buyer.
Yes! FIRPTA Tax Returns specializes in helping foreign sellers navigate withholding taxes, exemptions, and refunds. Our experts ensure your documents are accurate and submitted on time.
Gather all necessary documents well before the tax deadline.
Double-check forms and information to prevent delays.
Working with experienced tax consultants can simplify the process and maximize your refund.
At FIRPTA Tax Returns, we specialize in assisting foreign property sellers with
With years of experience, we’re here to make the process as stress-free as possible
Don’t leave money on the table. Contact FIRPTA Tax Returns to learn more about FIRPTA withholding, exemptions, and how to secure your refund. Our team is ready to help you navigate the process with ease and confidence.
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