Why every Realtor, Title Agent and Attorney should partner with an expert in FIRPTA real estate transactions?

Florida real estate market accounted for an average of 21% of all properties purchases by foreign people in 2021 **(National Association of Realtors).**

Based on the National Association of Realtors report 2022, measured by the number of homes purchased, Canada remained the top country of origin among foreign buyers during April 2021-March 2022, accounting for 11% of the number of foreign buyer home purchases in USA. Florida remained the major destination for Canadians, with a higher foreign buyer share of 24%. Florida gained in 2022 a three-percentage point market share from the prior period in 2021, likely because of the increase in Canadian buyers. Florida’s main buyers were from Latin America and Canada. It was the top state destination among Canadian, Mexican, and Colombian buyers.

So your chance to sell a property to non-Americans is pretty high. Why not put all hassles aside and assure you to conduct a smooth real estate transaction.

Advantages to team with us!

– Protect the seller and the buyer
– Protect title company from liability
– We assist with IRS and take the burden of IRS away from all parties
– We explain the process step by step so it makes the entire real estate transaction simpler, and helps to ensure that you don’t overlook any important information.
– Keep relevant with new FIRPTA changes and updates

WHAT IS FIRPTA (Foreign Investors Real Property Tax)?

Foreign Investor Real Property Tax Act (FIRPTA) requires that any disposition of a U.S. real property interest made by a foreign investor be subject to withholding tax. The buyer or seller can hold up to 15% (individual) or 21% (business) of the sale of the real property interest. A disposition may also include a gift, exchange, liquidation or other type of transfer. In addition, a timeshare, stocks or shares of a US company may be subject to FIRPTA.

FIRPTA COMPLIANCE

Exemption

Does it apply to your client?

Sale Price is less than $300,000.
Buyer signs affidavit of Exemption.
Seller is required to file a Federal Tax Return the following year.

Remittance

When to file?

It must be filed no later than 20 days after the closing date.
Send 15%(Individual) or 21% (Corporation) to the IRS of the amount realized on the sale (usually the gross selling price).
File Federal Tax Return the following year to claim withholding less tax liability.

Request a Withholding Certificate

We can help you!

Must be filed no later than the closing date.
Withholding is kept in an escrow account with the closing agent until IRS responds to application for reduced withholding. This process takes between 90 to 120 days.
Send the reduce withholding to the IRS.
File Federal Tax Return the following year to claim withholding less tax liability.

FIRPTA ONLINE CALCULATOR (Calculate your FIRPTA Withholding)

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FIRPTA SERVICES

Application for an ITIN (Individual Tax Identification Number)

A tax processing number issued by the IRS to register and identify the seller’s withholding amount when filing U.S. Tax.

Processing for U.S. Withholding from Foreign Persons

FIRPTA requires Forms 8288 and 8288-A when transactions occur with Foreign Persons involving dispositions of U.S. real property interest. It is crucial to have a FIRPTA Tax Advisor to fill these forms properly to avoid paying penalties and interest charges from the IRS.

Application for a Withholding Certificate

Form 8288-B. – The IRS can Issue a Withholding Certificate to reduce or eliminate withholding on dispositions of U.S real property interest from a Foreign Person.

We are Certified Acceptance Agent designated by the IRS

WHAT IS A CERTIFIED ACCEPTANCE AGENT? A Certifying Acceptance Agent is a person or an entity (business or organization) who, pursuant to a written agreement with the IRS, is authorized to assist individuals and other foreign persons who do not qualify for a Social Security Number but who still need a Taxpayer Identification Number (TIN) to file a US tax return.

WHAT WE CAN DO FOR YOU! We certify documents to obtain tax ID ITIN and this help also with the process of FIRPTA.

Contact our Certified Acceptance Agent »

Here at LBEA, we can guide you with this process, we work hand to hand with multiple closing agents and realtors and as an accounting firm we provide U.S. Income Tax Returns services for Foreign Corporations and Non-Residents. When we receive your withholding statement, we make sure your withholding is properly reported to the IRS, this step is crucial when applying the withholding against any tax owed or receiving a refund.

It’s highly recommended to contact a FIRPTA Tax Advisor, we can help!

FIRPTA TAX ADVISORS

Q & A

Who is responsible for FIRPTA withholding?

A Withholding Agent, any person having the control, receipt, custody, disposal or payment of income that is subject to withholding. Generally, the person who pays an amount to the foreign person subject to withholding must do FIRPTA withholding. The withholding agent can be liable for the full amount of FIRPTA withholding tax required to be withheld, plus penalties and interest, beginning on the 21st day after the date of transfer.

Why do I need a ITIN (Individual Tax Identification Number)?

The IRS requires tax filers to have a ITIN or a US Social Security Number to process your returns.
We can apply for an ITIN if you are a foreign person and have not been assigned a tax identification number by the IRS or a US Social Security Number.

Are there exceptions to the 15% for Foreign Persons?

Option A – If the sales price is less than $300,000 and the buyer signs an affidavit, the seller can eliminate the withholding. The affidavit must state that the buyer must reside at the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer.

Option B – The amount the transferor realizes on the sale of a U.S. real property interest is zero or less than the required withholding at 15%. An example in real estate, a seller has a sales contract for $400,000 with only $100,000 gain on the sale, taxable at a maximum capital tax gain of 20%. FIRPTA requires the buyer to withhold $60,000. Applying for a reduced withholding can lower the amount from $60,000 to $20,000 because the tax liability is less than the amount required to be withheld at 15% of the sale price.

What if I already have a sales professional working on my closing?

We often work alongside with other professionals to best meet your needs. We will work with your Sales professionals to process the FIRPTA documents.

How long does it take for the IRS to process an application for a Withholding Certificate?

The IRS will generally act on the applications within 90 days of a complete application. A complete application includes processing of a Taxpayer Identification Number of everyone involved the transaction.

What if the seller is taking a loss on their real property interest?

FIRPTA does not automatically exempt the seller when taking a loss on their Real Property Interest. An application for a withholding certificate with the assistance of a FIRPTA Tax Advisor may reduce the seller’s withholding with the IRS Form 8288-B. The application for withholding certificate must be done before or on the closing date.

Here’s an example: In 2007 a foreign person purchased a Real Estate Property for $350,000. The foreign person sold his Real Estate Property in 2018 for $320,000. The seller recognized a loss of $30,000 from the sale of the Real Estate Property. FIRPTA does not automatically exempt the seller from withholding on the loss of $30,000. At this point, the seller has two options: apply to reduce withholding or pay 15% of the sales price and claim the amount withheld on U.S Tax Return.

A foreign person has a sales contract of a U.S. Sales property for $400,000, with a closing date of June 5. The seller is considering applying for a Withholding Certificate to reduce his tax withholding. By when does the seller have to apply for a withholding certificate?

The seller has until the closing date to apply for a withholding certificate to lower or eliminate the withholding.

I, the seller, sent 15% withholding through FIRPTA, but I did not know about the Withholding Certificate. How do I get my money back?

This is a straightforward process once you have received a withholding statement from the IRS. Our Services extend to provide filing of U.S Income Tax Returns for Non-Residents, here we can file your return to claim the withholding less your tax liability.

FIRPTA for Realtors, Title Agents and Attorneys