FIRPTA: who, what, when, WHERE why & how
Who does FIRPTA affect?
Seller: 15% of the contract sale price is held back from Seller and is deposited with IRS.
Buyer: IRS holds Buyer responsible for FIRPTA if not deposited within 20 days of closing.
Realtors: must inform their respective Buyers & Sellers of FIRPTA requirements or be subject to IRS penalties and may be liable for professional negligence if FIRPTA compliance is not handled properly.
What is FIRPTA?
The Foreign Investment Real Property Tax Act (FIRPTA) affects every real estate sale.
FIRPTA is a tax law requiring Buyer hold back 15% of contract sale price from a foreign Seller and deposit the withheld FIRPTA funds with IRS to ensure foreign Seller settles their U.S. federal tax affairs.
Seller must either provide Buyer a certification of non-foreign status to exempt the real estate sale from FIRPTA withholding,
OR
Buyer must hold back 15% of the sale and turn the funds over to the IRS within 20 days.
When is FIRPTA required?
Buyer must sign the IRS FIRPTA forms and mail the FIRPTA forms to IRS along with withheld FIRPTA funds not later than 20 days after closing.
Where is FIRPTA required?
All U.S. real estate transfers are subject to FIRPTA rules.
Why is FIRPTA required?
Historically some foreign sellers had large tax liabilities, sold their property, pocketed 100% of the proceeds, left the U.S., then ignored their tax responsibilities and were beyond the reach of the IRS.
The FIRPTA tax regulation requires Buyer of property from a foreign Seller act as a Withholding Agent and retain 15% of the contract sale price and deposit the funds with IRS.
Similar to an employer retaining a percentage of employee wages and depositing the funds with IRS. Employee must file a tax return reporting income to claim a refund net of any unsettled tax liabilities.
Buyer: must hold back 15% of the sale and turn the funds over to the IRS within 20 days.
Seller: must file a tax return reporting the sale to claim a refund of the FIRPTA deposit.
How do I handle FIRPTA compliance?
Hire a firm with years of FIRPTA compliance experience.
Tax Solutions - FIRPTA Consulting handles everything BEFORE, DURING and AFTER the sale closing.
Advisory – we answer questions, give advice to reduce, eliminate, or comply with the FIRPTA rules.
Consulting – Tax Solutions will prepare all documents needed for closing, and we are there for you after the closing if you ever have a problem with the IRS or need help recovering your refund.
Tax Solutions - FIRPTA Consulting team of experts know FIRPTA.
We handle everything from answering questions, applying for a tax ID number, determining if the sale is subject to FIRPTA withholding, we prepare all FIRPTA documents, and we'll make certain the documents are sent properly.
If you don't know where to start, or you simply have questions, we are here to help. The call costs nothing, and we'll answer your questions. If we have to do work and provide written advice or prepare compliance documents, you will know the fee up front before we get started.
If you already closed and you are getting IRS notices, or your refund is overdue, call us, we can help. IRS often does not process documents correctly and then sends penalty notices.
We resolve IRS notices and often completely abate IRS proposed penalties.
Sold property and had FIRPTA withheld, now your money has disappeared at the IRS? We can help!
If you are a Title Company and you want training in FIRPTA for Escrow Officers, we work with underwriters in every state and we can provide FIRPTA continuing education training that you can use to make FIRPTA easy.
If you are a Title Company Business Development professional, we offer FIRPTA for Realtor training that will fill your next lunch & learn session.
We speak English, Spanish, Mandarin, Cantonese. See links below for simple to understand FIRPTA explainer videos in the languages listed.
English What Is FIRPTA? https://youtu.be/yzX19A2XTIU
Spanish Que es FIRPTA https://www.youtube.com/watch?v=kNcVjuJ2rSs
FIRPTA in Mandarin (Chinese) https://youtu.be/P-mCT3zUYDs
FIRPTA in Cantonese (Chinese) https://youtu.be/28yU4dV6sVI
We will bring clarity to this complex topic and the call is free.
If you have FIRPTA questions, contact us, we will make FIRPTA easy for you!
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Mary Enzi
Tax Solutions – FIRPTA Consulting
Barker TX
+1 (281) 578-1040
[email protected]------------------------------