Open Forum

This is quite lengthy; I aimed to be concise while still providing as much pertinent information as possible.

Additionally, I'm not implying that FIRPTA falls under Title responsibility. I have the pleasure of collaborating with many of you, and each of you has a distinct perspective on FIRPTA. Some of you are deeply engaged, while others prefer to avoid it altogether.

Nevertheless, we are facing upcoming changes at the IRS that could complicate sending FIRPTA deposits for many of us, so without further ado, let's dive in.

FIRPTA Compliance Challenges for Title Industry: Mandatory Electronic Payments

Summary

When a foreign person sells U.S. real estate, a law called FIRPTA requires the buyer to hold back 15% of the sale price as a tax deposit and send it to the IRS, along with some forms, within 20 days after the deal closes. The buyer is fully responsible for this, title companies and closing agents aren't legally on the hook-even though buyers often expect them to handle it because they don't understand taxes.

A new rule, outlined in President Trump's Executive Order 14247, signed in March 2025, states that, starting September 30, 2025, all payments to the government must be made electronically, rather than via paper checks. This makes things more challenging for buyers who are unfamiliar with setting up online payments through the IRS's system (EFTPS), potentially leading to fines, delays, and lost funds. Problems include buyers not knowing their duties, confusion over who is responsible, foreign sellers not wanting to pay for assistance, IRS mistakes in handling payments, and a lack of clear guidance from professionals like title agents and realtors. These issues could disrupt closings, put title companies at risk of lawsuits or poor reputations, and necessitate better education before the deadline arrives.

Executive Summary

FIRPTA requires buyers (transferees) of U.S. real property from non-resident aliens to withhold and remit 15% of the sale price to the IRS via Forms 8288 and 8288-A within 20 days of closing, per IRC §1445. Title companies and settlement agents are exempt from liability but often provide informal assistance, as buyers lack expertise in tax matters.

Executive Order 14247 (March 25, 2025) mandates electronic payments effective September 30, 2025, banning paper checks and raising hurdles for buyers without EFTPS.

Introduction

The title industry facilitates real estate closings amid regulatory complexities. For U.S. real property interest (USRPI) sales by NRA sellers, FIRPTA adds tax burdens primarily on buyers as withholding agents.[1] Executive Order 14247's electronic remittance mandate heightens the risk of non-compliance.[2] This paper outlines core issues to foster discussion among title professionals, realtors, and tax advisors, without proposing solutions.

Issue 1: Buyer Unawareness and Lack of Preparedness

Most individual buyers in USRPI transactions are unfamiliar with FIRPTA requirements, including their role as withholding agents.[3] They often lack knowledge of how to calculate the 15% withholding on the amount realized, prepare Forms 8288 and 8288-A, or establish an EFTPS account for electronic deposits.[4] Buyers typically rely on title companies, settlement agents, or realtors for guidance, assuming these professionals handle tax compliance. This buyer dependency on their Realtor and Title settlement agent creates vulnerabilities, as buyers remain liable for any failures, including penalties for late or improper remittances.[5]

The executive order's elimination of paper checks post-September 30, 2025, intensifies this problem, as buyers without EFTPS already set up and running before closing may face immediate barriers to compliance within the 20-day window.[6] Uneducated buyers risk incurring automated IRS penalties, such as a 10% penalty for non-electronic deposits, plus accrued interest and failure-to-remit timely penalties.[7]

Issue 2: Shift to Mandatory Electronic Remittances

Executive Order 14247 mandates electronic processing for all payments to the federal government, including tax withholding like those under FIRPTA.[8] Previously, many FIRPTA remittances were handled via paper checks mailed to the IRS Ogden Service Center.[9] Now, all deposits must use EFTPS or other electronic methods, with no broad exceptions for typical real estate buyers.[10]

This change poses logistical hurdles: setting up an EFTPS account requires a taxpayer identification number and can take time, potentially delaying closings. Failed attempts (e.g., mailing a check) could result in rejection, triggering penalties under IRC Section 6656 for improper deposit methods.[11] For NRA sellers, whose withheld funds are held in trust,[12] uncredited or delayed deposits complicate tax credit claims and refunds, indirectly affecting title processes.

Issue 3: Misalignment of Responsibilities and Delegation Limits

Treasury regulations designate the buyer as the withholding agent, with ultimate responsibility for remittance and reporting.[13] Title companies and settlement agents are not liable for FIRPTA withholding, even when acting as qualified substitutes for specific tasks, such as providing certifications.[14] However, in practice, settlement agents often perform clerical functions informally, without formal agreements, which can lead to blurred lines of responsibility.[15]

If compliance fails-due to IRS processing delays or errors-penalty notices are assessed against the buyer.[16] While buyers may pursue recourse against title companies for negligence (e.g., if promised services were not delivered on time), this does not shield buyers from IRS enforcement penalty actions.[17] The electronic mandate amplifies these risks, as delegation of tasks remains possible (whether formal or informal); however, delegation of responsibility cannot be shifted.[18]

Issue 4: Seller Reluctance to Bear Compliance Costs

In approximately 90% of transactions involving a foreign seller, the foreign seller engages tax professionals to handle FIRPTA, recognizing that withheld funds belong to the seller and proper compliance ensures credits toward the seller's tax liability.[19] However, in 10% of cases, sellers interpret regulations as placing the burden solely on the buyer, refusing to pay for the cost of FIRPTA compliance services.[20] This overlooks that buyers prioritize timely remittance over the seller's withheld FIRPTA deposit recovery.

The FIRPTA process mirrors payroll withholding: the payor (buyer) remits funds, which are later credited to the payee (seller).[21] With electronic requirements, incomplete compliance risks penalties for the buyer and un-applied deposits, leaving sellers without credit for the FIRPTA deposit withheld at the closing.[22]

Issue 5: Risks of IRS Processing Errors and Penalties

Even timely remittances can trigger penalties due to IRS delays in processing forms, such as crediting deposits or matching them to seller accounts.[23] Under the new electronic regime, rejected paper attempts could lead to 10% penalties for failure to remit electronically, plus daily accruing failure-to-remit charges and interest.[24]

Penalties include those under IRC Section 6651 for failure to file or pay, up to $10,000 under Section 7202 for willful failures, and personal liability for responsible parties under Section 6672.[25] For the title industry, these errors heighten reputational risks, as clients may blame professionals for outcomes beyond the control of the Title Company or settlement agent.

Issue 6: Systemic Inefficiencies in Education and Referrals

Title companies frequently refer parties to tax experts for FIRPTA compliance, but inconsistencies persist in explaining roles, penalties, and electronic requirements.[26] This gap in understanding contributes to the non-engagement rate among buyers and sellers, as well as overall transaction friction. As the September 30, 2025, deadline approaches, without enhanced awareness campaigns, the industry risks disruptions in transactions involving foreign sellers.[27]

Exploring Practical Solutions

To address these challenges, the title industry could consider common-sense strategies, drawing from established best practices. These are exploratory ideas to mitigate risks without assuming liability:

• Enhance Education and Referrals: Develop standardized FIRPTA checklists and informational packets for buyers and sellers at initial engagement. Partner with tax professionals for webinars on EFTPS setup and roles, ensuring consistent guidance.
• Pre-Closing Preparation: Require early verification of seller status via non-foreign certifications and assist buyers in EFTPS registration during due diligence, potentially integrating it into escrow processes to avoid delays.
• Formalize Delegation: Use qualified substitute agreements for clerical tasks, clearly delineating non-liability in contracts to reduce blurred lines and protect against negligence claims.
• Address Seller Reluctance: Educate sellers on how compliance benefits their refunds, perhaps by including cost-sharing clauses in purchase agreements or offering bundled services.
• Mitigate IRS Errors and Penalties: Build referral networks for penalty abatement specialists and encourage use of withholding certificates to reduce withholding rates, minimizing exposure.
• Industry-Wide Initiatives: Collaborate through associations like ALTA for awareness campaigns, leveraging EO-mandated Treasury resources, and advocate for IRS tools tailored to real estate transactions.

These approaches aim to streamline operations while safeguarding the industry's integrity.

Conclusion

FIRPTA compliance intersects critically with title industry practices, intensified by electronic mandates. By exploring these solutions collaboratively, title professionals can reduce risks, enhance efficiency, and support smoother transactions ahead of the transition.

Footnotes

[1] Treas. Reg. § 1.1445-1(a); IRC § 1445(a).
[2] Executive Order 14247, Sec. 3(c).
[3] Treas. Reg. § 1.1445-1(c)(1).
[4] Form 8288 Instructions (01/2023), p. 1.
[5] IRC § 6651(a).
[6] Executive Order 14247, Sec. 3(a); Treas. Reg. § 1.1445-1(c)(2).
[7] IRC § 6656(a); IRM 20.1.4.26.
[8] Executive Order 14247, Sec. 1 and Sec. 3(c).
[9] Form 8288 Instructions (01/2023), p. 2.
[10] Executive Order 14247, Sec. 4(a).
[11] IRC § 6656(a).
[12] Treas. Reg. § 1.1445-1(e)(1).
[13] Treas. Reg. § 1.1445-1(a).
[14] Treas. Reg. § 1.1445-2(b)(2)(ii) (regarding qualified substitutes for certifications); Treas. Reg. § 1.1445-4(f) (excluding settlement agents from direct liability).
[15] Treas. Reg. § 1.1445-1(f).
[16] IRM 20.1.4.
[17] IRC § 6672.
[18] Treas. Reg. § 1.1445-1(e)(2).
[19] Based on the author's direct observations of referral patterns, see FIRPTA withholding overview.
[20] Treas. Reg. § 1.1445-1(b).
[21] Analogous to IRC § 3402 (payroll withholding).
[22] Treas. Reg. § 1.1445-1(f)(3).
[23] IRM 20.1.9.
[24] IRC § 6651; IRC § 6656.
[25] Form 8288 Instructions (01/2023), p. 3; IRC § 7202.
[26] Executive Order 14247, Sec. 5(a).
[27] Executive Order 14247, Sec. 6.

Summaries of Relevant FIRPTA Law and Regulations

Footnotes Summaries

[1] Treas. Reg. § 1.1445-1(a); IRC § 1445(a).
General withholding requirement mandating transferees to deduct and withhold 15% tax (or 10% for certain residences) on dispositions of U.S. real property interests by foreign persons.

[2] Executive Order 14247, Sec. 3(c).
Mandate for all payments to the Federal Government to be processed electronically effective September 30, 2025.

[3] Treas. Reg. § 1.1445-1(c)(1).
Requirement for transferees to report and pay withheld tax by the 20th day after the date of transfer using Forms 8288 and 8288-A; timely mailing treated as timely filing.

[4] Form 8288 Instructions (01/2024), p. 1.
Explanation that Form 8288 reports and transmits amounts withheld under sections 1445 and 1446(f) for dispositions after January 1, 2023, including who must file, when, and what to include.

[5] IRC § 6651(a).
Imposition of penalties for failure to file tax returns or pay taxes shown on returns, starting at 5% per month up to 25%, reducible if reasonable cause is shown and not due to willful neglect.

[6] Executive Order 14247, Sec. 3(a); Treas. Reg. § 1.1445-1(c)(2).
Cessation of paper check disbursements effective September 30, 2025, for all federal payments except specified exceptions; regulation permitting delayed reporting and payment if a withholding certificate application is pending at transfer, but withholding still required unless certificate issued pre-transfer.

[7] IRC § 6656(a); IRM 20.1.4.26.
Penalty for failure to deposit taxes equal to a tiered percentage of the underpayment based on lateness (2-10%), unless reasonable cause; IRM detailing CP 194 notice procedures, including penalty assessment, computation, and taxpayer appeal processes for failure to deposit.

[8] Executive Order 14247, Sec. 1 and Sec. 3(c).
The purpose is to phase out paper-based payments for federal disbursements and receipts to reduce costs, delays, fraud, theft, and inefficiencies; and to mandate the electronic processing of all payments to the government where practicable under law.

[9] Form 8288 Instructions (01/2023), p. 2.
Filing instructions requiring submission of Form 8288 with withheld tax to IRS Ogden Service Center by the 20th day after transfer, including attachment of Forms 8288-A for each withholdable person and details on multiple transferors/transferees.

[10] Executive Order 14247, Sec. 4(a).
Directive for the Secretary of the Treasury to review and revise procedures for limited exceptions to electronic payment requirements, including for unbanked individuals, emergencies under 31 CFR Part 208, national security, and other circumstances per regulations.

[11] IRC § 6656(a).
Penalty for failure to make timely deposits of taxes, imposed as a percentage of the underpayment (2% if 1-5 days late, 5% if 6-15 days, 10% if over 15 days or notice issued), waivable for reasonable cause.

[12] Treas. Reg. § 1.1445-1(e)(1).
Liability of withholding agents (transferees or others required to withhold under section 1445) for the full amount of tax due, plus applicable penalties and interest, if withholding is not performed.

[13] Treas. Reg. § 1.1445-1(a).
General rules for withholding under section 1445, requiring 15% tax (or 10% for qualifying residences) on amount realized from foreign dispositions of U.S. real property interests, unless exceptions apply.

[14] Treas. Reg. § 1.1445-2(b)(2)(ii) (regarding qualified substitutes for certifications); Treas. Reg. § 1.1445-4(f) (excluding settlement agents from direct liability).

Definition of qualified substitutes (e.g., closing attorneys or title companies) to furnish certifications of non-foreign status or other exemptions; regulations clarifying that settlement agents and title companies are not designated as withholding agents and bear no direct liability for withholding failures unless acting as the transferee's agent.

[15] Treas. Reg. § 1.1445-1(f).
Rule that withholding under section 1445 does not excuse foreign persons from filing U.S. tax returns; withheld amounts credited against tax liability only upon submission of a stamped Copy B of Form 8288-A with the return.

[16] IRM 20.1.4.
Policies, procedures, and guidelines for assessing failure to deposit penalties under various IRC sections, including deposit requirements, computation methods, reasonable cause relief, and administrative processes for taxes like employment, excise, and withholding.

[17] IRC § 6672.
Penalty for willful failure to collect, account for, and pay over taxes held in trust (trust fund recovery penalty), equal to the unpaid amount; includes notice requirements, assessment procedures, and rights for contribution from other responsible persons.

[18] Treas. Reg. § 1.1445-1(e)(2).
Transferee liability for tax, penalties, and interest if withholding is omitted, unless the transferor's full tax liability is satisfied via a filed return showing payment or a withholding certificate confirms no liability.

[19] Based on author's observation of industry referral patterns; see FIRPTA withholding overview.
Referral data from title companies and tax professionals showing that in approximately 90% of USRPI transactions involving NRA sellers, the sellers engage experts to manage FIRPTA compliance due to ownership of withheld funds and interest in refunds.

[20] Treas. Reg. § 1.1445-1(b).
Requirement for transferees to withhold 15% of the amount realized on dispositions by foreign transferors of U.S. real property interests, with provisions for reduced rates or exemptions under specific conditions.

[21] Analogous to IRC § 3402 (payroll withholding).
Requirement for employers to withhold income taxes from employee wages according to prescribed tables, computational procedures, or percentage methods, adjusted for payroll periods, exemptions, and additional withholding requests.

[22] Treas. Reg. § 1.1445-1(f)(3).
Allowance for transferors lacking a stamped Form 8288-A to claim credit for withheld tax by attaching substantial evidence of withholding (e.g., closing documents) and a detailed explanatory statement to their tax return.

[23] IRM 20.1.9.
Procedures for international information return penalties under sections like 6677, 6679, including assessment criteria, reasonable cause determinations, abatement processes, and specific forms such as 5471, 5472, 3520, with emphasis on foreign reporting compliance.

[24] IRC § 6651; IRC § 6656.
Penalties for failure to file returns or pay taxes (up to 25% under §6651) and for failure to deposit taxes (tiered 2-10% under §6656), both subject to reduction or waiver if due to reasonable cause and not willful neglect.

[25] Form 8288 Instructions (01/2023), p. 3; IRC § 7202.
Instructions outlining penalties for late filing/payments (§6651), willful failures (§7202, felony up to $10,000 fine and 5 years imprisonment), and trust fund recovery (§6672); §7202 criminalizing willful failure to collect or pay over any tax as a felony punishable by fine and imprisonment.

[26] Executive Order 14247, Sec. 5(a).
Directive for the Secretary of the Treasury, with agencies, to implement a public awareness campaign educating federal payment recipients on the electronic transition, including guidance for accessing and enrolling in digital payment options.

[27] Executive Order 14247, Sec. 6.
Requirement for agency heads to submit compliance plans within 90 days detailing transition steps and challenges; annual Treasury reports to the President on progress, paper check reductions, cost savings, and further recommendations.

Summary of Executive Order 14247

Executive Order 14247, "Modernizing Payments to and From America's Bank Account," signed March 25, 2025, phases out paper payments to cut costs, delays, and fraud. Effective September 30, 2025, the Treasury will halt paper checks for disbursements and receipts, including taxes, and shift to EFTPS, direct deposits, and digital options. 

Author: Marc Enzi, EA, CFP®

Marc Enzi, EA, CFP®, is a recognized expert in FIRPTA compliance, based in Katy, Texas. He specializes in assisting with FIRPTA matters, penalty abatement, and recovery of withheld deposit refunds for foreign sellers of U.S. real estate. Marc Enzi speaks nationally on these topics and is available to address inquiries from title professionals.

Contact: [email protected], (877) 568-1545, www.gotFIRPTA.com

This is such a great article.  Do you also have an office in Florida? 

This is quite lengthy; I aimed to be concise while still providing as much pertinent information as possible.

Additionally, I'm not implying that FIRPTA falls under Title responsibility. I have the pleasure of collaborating with many of you, and each of you has a distinct perspective on FIRPTA. Some of you are deeply engaged, while others prefer to avoid it altogether.

Nevertheless, we are facing upcoming changes at the IRS that could complicate sending FIRPTA deposits for many of us, so without further ado, let's dive in.

FIRPTA Compliance Challenges for Title Industry: Mandatory Electronic Payments

Summary

When a foreign person sells U.S. real estate, a law called FIRPTA requires the buyer to hold back 15% of the sale price as a tax deposit and send it to the IRS, along with some forms, within 20 days after the deal closes. The buyer is fully responsible for this, title companies and closing agents aren't legally on the hook-even though buyers often expect them to handle it because they don't understand taxes.

A new rule, outlined in President Trump's Executive Order 14247, signed in March 2025, states that, starting September 30, 2025, all payments to the government must be made electronically, rather than via paper checks. This makes things more challenging for buyers who are unfamiliar with setting up online payments through the IRS's system (EFTPS), potentially leading to fines, delays, and lost funds. Problems include buyers not knowing their duties, confusion over who is responsible, foreign sellers not wanting to pay for assistance, IRS mistakes in handling payments, and a lack of clear guidance from professionals like title agents and realtors. These issues could disrupt closings, put title companies at risk of lawsuits or poor reputations, and necessitate better education before the deadline arrives.

Executive Summary

FIRPTA requires buyers (transferees) of U.S. real property from non-resident aliens to withhold and remit 15% of the sale price to the IRS via Forms 8288 and 8288-A within 20 days of closing, per IRC §1445. Title companies and settlement agents are exempt from liability but often provide informal assistance, as buyers lack expertise in tax matters.

Executive Order 14247 (March 25, 2025) mandates electronic payments effective September 30, 2025, banning paper checks and raising hurdles for buyers without EFTPS.

Introduction

The title industry facilitates real estate closings amid regulatory complexities. For U.S. real property interest (USRPI) sales by NRA sellers, FIRPTA adds tax burdens primarily on buyers as withholding agents.[1] Executive Order 14247's electronic remittance mandate heightens the risk of non-compliance.[2] This paper outlines core issues to foster discussion among title professionals, realtors, and tax advisors, without proposing solutions.

Issue 1: Buyer Unawareness and Lack of Preparedness

Most individual buyers in USRPI transactions are unfamiliar with FIRPTA requirements, including their role as withholding agents.[3] They often lack knowledge of how to calculate the 15% withholding on the amount realized, prepare Forms 8288 and 8288-A, or establish an EFTPS account for electronic deposits.[4] Buyers typically rely on title companies, settlement agents, or realtors for guidance, assuming these professionals handle tax compliance. This buyer dependency on their Realtor and Title settlement agent creates vulnerabilities, as buyers remain liable for any failures, including penalties for late or improper remittances.[5]

The executive order's elimination of paper checks post-September 30, 2025, intensifies this problem, as buyers without EFTPS already set up and running before closing may face immediate barriers to compliance within the 20-day window.[6] Uneducated buyers risk incurring automated IRS penalties, such as a 10% penalty for non-electronic deposits, plus accrued interest and failure-to-remit timely penalties.[7]

Issue 2: Shift to Mandatory Electronic Remittances

Executive Order 14247 mandates electronic processing for all payments to the federal government, including tax withholding like those under FIRPTA.[8] Previously, many FIRPTA remittances were handled via paper checks mailed to the IRS Ogden Service Center.[9] Now, all deposits must use EFTPS or other electronic methods, with no broad exceptions for typical real estate buyers.[10]

This change poses logistical hurdles: setting up an EFTPS account requires a taxpayer identification number and can take time, potentially delaying closings. Failed attempts (e.g., mailing a check) could result in rejection, triggering penalties under IRC Section 6656 for improper deposit methods.[11] For NRA sellers, whose withheld funds are held in trust,[12] uncredited or delayed deposits complicate tax credit claims and refunds, indirectly affecting title processes.

Issue 3: Misalignment of Responsibilities and Delegation Limits

Treasury regulations designate the buyer as the withholding agent, with ultimate responsibility for remittance and reporting.[13] Title companies and settlement agents are not liable for FIRPTA withholding, even when acting as qualified substitutes for specific tasks, such as providing certifications.[14] However, in practice, settlement agents often perform clerical functions informally, without formal agreements, which can lead to blurred lines of responsibility.[15]

If compliance fails-due to IRS processing delays or errors-penalty notices are assessed against the buyer.[16] While buyers may pursue recourse against title companies for negligence (e.g., if promised services were not delivered on time), this does not shield buyers from IRS enforcement penalty actions.[17] The electronic mandate amplifies these risks, as delegation of tasks remains possible (whether formal or informal); however, delegation of responsibility cannot be shifted.[18]

Issue 4: Seller Reluctance to Bear Compliance Costs

In approximately 90% of transactions involving a foreign seller, the foreign seller engages tax professionals to handle FIRPTA, recognizing that withheld funds belong to the seller and proper compliance ensures credits toward the seller's tax liability.[19] However, in 10% of cases, sellers interpret regulations as placing the burden solely on the buyer, refusing to pay for the cost of FIRPTA compliance services.[20] This overlooks that buyers prioritize timely remittance over the seller's withheld FIRPTA deposit recovery.

The FIRPTA process mirrors payroll withholding: the payor (buyer) remits funds, which are later credited to the payee (seller).[21] With electronic requirements, incomplete compliance risks penalties for the buyer and un-applied deposits, leaving sellers without credit for the FIRPTA deposit withheld at the closing.[22]

Issue 5: Risks of IRS Processing Errors and Penalties

Even timely remittances can trigger penalties due to IRS delays in processing forms, such as crediting deposits or matching them to seller accounts.[23] Under the new electronic regime, rejected paper attempts could lead to 10% penalties for failure to remit electronically, plus daily accruing failure-to-remit charges and interest.[24]

Penalties include those under IRC Section 6651 for failure to file or pay, up to $10,000 under Section 7202 for willful failures, and personal liability for responsible parties under Section 6672.[25] For the title industry, these errors heighten reputational risks, as clients may blame professionals for outcomes beyond the control of the Title Company or settlement agent.

Issue 6: Systemic Inefficiencies in Education and Referrals

Title companies frequently refer parties to tax experts for FIRPTA compliance, but inconsistencies persist in explaining roles, penalties, and electronic requirements.[26] This gap in understanding contributes to the non-engagement rate among buyers and sellers, as well as overall transaction friction. As the September 30, 2025, deadline approaches, without enhanced awareness campaigns, the industry risks disruptions in transactions involving foreign sellers.[27]

Exploring Practical Solutions

To address these challenges, the title industry could consider common-sense strategies, drawing from established best practices. These are exploratory ideas to mitigate risks without assuming liability:

• Enhance Education and Referrals: Develop standardized FIRPTA checklists and informational packets for buyers and sellers at initial engagement. Partner with tax professionals for webinars on EFTPS setup and roles, ensuring consistent guidance.
• Pre-Closing Preparation: Require early verification of seller status via non-foreign certifications and assist buyers in EFTPS registration during due diligence, potentially integrating it into escrow processes to avoid delays.
• Formalize Delegation: Use qualified substitute agreements for clerical tasks, clearly delineating non-liability in contracts to reduce blurred lines and protect against negligence claims.
• Address Seller Reluctance: Educate sellers on how compliance benefits their refunds, perhaps by including cost-sharing clauses in purchase agreements or offering bundled services.
• Mitigate IRS Errors and Penalties: Build referral networks for penalty abatement specialists and encourage use of withholding certificates to reduce withholding rates, minimizing exposure.
• Industry-Wide Initiatives: Collaborate through associations like ALTA for awareness campaigns, leveraging EO-mandated Treasury resources, and advocate for IRS tools tailored to real estate transactions.

These approaches aim to streamline operations while safeguarding the industry's integrity.

Conclusion

FIRPTA compliance intersects critically with title industry practices, intensified by electronic mandates. By exploring these solutions collaboratively, title professionals can reduce risks, enhance efficiency, and support smoother transactions ahead of the transition.

Footnotes

[1] Treas. Reg. § 1.1445-1(a); IRC § 1445(a).
[2] Executive Order 14247, Sec. 3(c).
[3] Treas. Reg. § 1.1445-1(c)(1).
[4] Form 8288 Instructions (01/2023), p. 1.
[5] IRC § 6651(a).
[6] Executive Order 14247, Sec. 3(a); Treas. Reg. § 1.1445-1(c)(2).
[7] IRC § 6656(a); IRM 20.1.4.26.
[8] Executive Order 14247, Sec. 1 and Sec. 3(c).
[9] Form 8288 Instructions (01/2023), p. 2.
[10] Executive Order 14247, Sec. 4(a).
[11] IRC § 6656(a).
[12] Treas. Reg. § 1.1445-1(e)(1).
[13] Treas. Reg. § 1.1445-1(a).
[14] Treas. Reg. § 1.1445-2(b)(2)(ii) (regarding qualified substitutes for certifications); Treas. Reg. § 1.1445-4(f) (excluding settlement agents from direct liability).
[15] Treas. Reg. § 1.1445-1(f).
[16] IRM 20.1.4.
[17] IRC § 6672.
[18] Treas. Reg. § 1.1445-1(e)(2).
[19] Based on the author's direct observations of referral patterns, see FIRPTA withholding overview.
[20] Treas. Reg. § 1.1445-1(b).
[21] Analogous to IRC § 3402 (payroll withholding).
[22] Treas. Reg. § 1.1445-1(f)(3).
[23] IRM 20.1.9.
[24] IRC § 6651; IRC § 6656.
[25] Form 8288 Instructions (01/2023), p. 3; IRC § 7202.
[26] Executive Order 14247, Sec. 5(a).
[27] Executive Order 14247, Sec. 6.

Summaries of Relevant FIRPTA Law and Regulations

Footnotes Summaries

[1] Treas. Reg. § 1.1445-1(a); IRC § 1445(a).
General withholding requirement mandating transferees to deduct and withhold 15% tax (or 10% for certain residences) on dispositions of U.S. real property interests by foreign persons.

[2] Executive Order 14247, Sec. 3(c).
Mandate for all payments to the Federal Government to be processed electronically effective September 30, 2025.

[3] Treas. Reg. § 1.1445-1(c)(1).
Requirement for transferees to report and pay withheld tax by the 20th day after the date of transfer using Forms 8288 and 8288-A; timely mailing treated as timely filing.

[4] Form 8288 Instructions (01/2024), p. 1.
Explanation that Form 8288 reports and transmits amounts withheld under sections 1445 and 1446(f) for dispositions after January 1, 2023, including who must file, when, and what to include.

[5] IRC § 6651(a).
Imposition of penalties for failure to file tax returns or pay taxes shown on returns, starting at 5% per month up to 25%, reducible if reasonable cause is shown and not due to willful neglect.

[6] Executive Order 14247, Sec. 3(a); Treas. Reg. § 1.1445-1(c)(2).
Cessation of paper check disbursements effective September 30, 2025, for all federal payments except specified exceptions; regulation permitting delayed reporting and payment if a withholding certificate application is pending at transfer, but withholding still required unless certificate issued pre-transfer.

[7] IRC § 6656(a); IRM 20.1.4.26.
Penalty for failure to deposit taxes equal to a tiered percentage of the underpayment based on lateness (2-10%), unless reasonable cause; IRM detailing CP 194 notice procedures, including penalty assessment, computation, and taxpayer appeal processes for failure to deposit.

[8] Executive Order 14247, Sec. 1 and Sec. 3(c).
The purpose is to phase out paper-based payments for federal disbursements and receipts to reduce costs, delays, fraud, theft, and inefficiencies; and to mandate the electronic processing of all payments to the government where practicable under law.

[9] Form 8288 Instructions (01/2023), p. 2.
Filing instructions requiring submission of Form 8288 with withheld tax to IRS Ogden Service Center by the 20th day after transfer, including attachment of Forms 8288-A for each withholdable person and details on multiple transferors/transferees.

[10] Executive Order 14247, Sec. 4(a).
Directive for the Secretary of the Treasury to review and revise procedures for limited exceptions to electronic payment requirements, including for unbanked individuals, emergencies under 31 CFR Part 208, national security, and other circumstances per regulations.

[11] IRC § 6656(a).
Penalty for failure to make timely deposits of taxes, imposed as a percentage of the underpayment (2% if 1-5 days late, 5% if 6-15 days, 10% if over 15 days or notice issued), waivable for reasonable cause.

[12] Treas. Reg. § 1.1445-1(e)(1).
Liability of withholding agents (transferees or others required to withhold under section 1445) for the full amount of tax due, plus applicable penalties and interest, if withholding is not performed.

[13] Treas. Reg. § 1.1445-1(a).
General rules for withholding under section 1445, requiring 15% tax (or 10% for qualifying residences) on amount realized from foreign dispositions of U.S. real property interests, unless exceptions apply.

[14] Treas. Reg. § 1.1445-2(b)(2)(ii) (regarding qualified substitutes for certifications); Treas. Reg. § 1.1445-4(f) (excluding settlement agents from direct liability).

Definition of qualified substitutes (e.g., closing attorneys or title companies) to furnish certifications of non-foreign status or other exemptions; regulations clarifying that settlement agents and title companies are not designated as withholding agents and bear no direct liability for withholding failures unless acting as the transferee's agent.

[15] Treas. Reg. § 1.1445-1(f).
Rule that withholding under section 1445 does not excuse foreign persons from filing U.S. tax returns; withheld amounts credited against tax liability only upon submission of a stamped Copy B of Form 8288-A with the return.

[16] IRM 20.1.4.
Policies, procedures, and guidelines for assessing failure to deposit penalties under various IRC sections, including deposit requirements, computation methods, reasonable cause relief, and administrative processes for taxes like employment, excise, and withholding.

[17] IRC § 6672.
Penalty for willful failure to collect, account for, and pay over taxes held in trust (trust fund recovery penalty), equal to the unpaid amount; includes notice requirements, assessment procedures, and rights for contribution from other responsible persons.

[18] Treas. Reg. § 1.1445-1(e)(2).
Transferee liability for tax, penalties, and interest if withholding is omitted, unless the transferor's full tax liability is satisfied via a filed return showing payment or a withholding certificate confirms no liability.

[19] Based on author's observation of industry referral patterns; see FIRPTA withholding overview.
Referral data from title companies and tax professionals showing that in approximately 90% of USRPI transactions involving NRA sellers, the sellers engage experts to manage FIRPTA compliance due to ownership of withheld funds and interest in refunds.

[20] Treas. Reg. § 1.1445-1(b).
Requirement for transferees to withhold 15% of the amount realized on dispositions by foreign transferors of U.S. real property interests, with provisions for reduced rates or exemptions under specific conditions.

[21] Analogous to IRC § 3402 (payroll withholding).
Requirement for employers to withhold income taxes from employee wages according to prescribed tables, computational procedures, or percentage methods, adjusted for payroll periods, exemptions, and additional withholding requests.

[22] Treas. Reg. § 1.1445-1(f)(3).
Allowance for transferors lacking a stamped Form 8288-A to claim credit for withheld tax by attaching substantial evidence of withholding (e.g., closing documents) and a detailed explanatory statement to their tax return.

[23] IRM 20.1.9.
Procedures for international information return penalties under sections like 6677, 6679, including assessment criteria, reasonable cause determinations, abatement processes, and specific forms such as 5471, 5472, 3520, with emphasis on foreign reporting compliance.

[24] IRC § 6651; IRC § 6656.
Penalties for failure to file returns or pay taxes (up to 25% under §6651) and for failure to deposit taxes (tiered 2-10% under §6656), both subject to reduction or waiver if due to reasonable cause and not willful neglect.

[25] Form 8288 Instructions (01/2023), p. 3; IRC § 7202.
Instructions outlining penalties for late filing/payments (§6651), willful failures (§7202, felony up to $10,000 fine and 5 years imprisonment), and trust fund recovery (§6672); §7202 criminalizing willful failure to collect or pay over any tax as a felony punishable by fine and imprisonment.

[26] Executive Order 14247, Sec. 5(a).
Directive for the Secretary of the Treasury, with agencies, to implement a public awareness campaign educating federal payment recipients on the electronic transition, including guidance for accessing and enrolling in digital payment options.

[27] Executive Order 14247, Sec. 6.
Requirement for agency heads to submit compliance plans within 90 days detailing transition steps and challenges; annual Treasury reports to the President on progress, paper check reductions, cost savings, and further recommendations.

Summary of Executive Order 14247

Executive Order 14247, "Modernizing Payments to and From America's Bank Account," signed March 25, 2025, phases out paper payments to cut costs, delays, and fraud. Effective September 30, 2025, the Treasury will halt paper checks for disbursements and receipts, including taxes, and shift to EFTPS, direct deposits, and digital options. 

Author: Marc Enzi, EA, CFP®

Marc Enzi, EA, CFP®, is a recognized expert in FIRPTA compliance, based in Katy, Texas. He specializes in assisting with FIRPTA matters, penalty abatement, and recovery of withheld deposit refunds for foreign sellers of U.S. real estate. Marc Enzi speaks nationally on these topics and is available to address inquiries from title professionals.

Contact: [email protected], (877) 568-1545, www.gotFIRPTA.com