Done For You FIRPTA Process
Check out this explainer video
FIRPTA CPA is the brain child of our Founder Stephan H. Brewer, CPA, CTRS, JSM Tax and NTPI Fellow. Stephan believed the regulations and requirements around Foreign Investment of Real Property Tax Act (FIRPTA) were far too complicated and the available information was not adequate to protect those that could be held responsible (Withholding Agent) for the penalties in the absence of available information. Stephan conducted a considerable amount of research and made the information available to the general public. The information became so popular that be became known as the FIRPTA CPA. As news spread throughout the community to those typically held responsible for providing guidance to the (Withholding Agent- typically the seller), the title companies throughout the United States, the demand to prepare the FIRPTA documents grew. To support this community we put considerable time and effort into developing a streaming method to prepare the FIRPTA documents (Form 8288, 8288-A, 8288- B and 8288-C) for the title companies. We also provide the instructions for the title companies on how to process the documents and obtain an IRS Power of Attorney (Form 8288) so we may make any necessary inquires to insure the funds have been placed under the proper TIN (SSN or ITIN), and the status of the withholding certificate.
Our Services
ITIN Applications
Under FIRPTA there are a number of reason why a seller MUST have an Individual Taxpayer Identification Number (ITIN) 1) To submit the FIRPTA Remittance Form 8288, 8288-A, copy A, B, C 2) To apply for a Withholding Certificate. Submitting the FIRPTA remittance form to the IRS without an ITIN number is a huge mistake. In order to submit the form with the withholdings (15% of the gross sales price) the seller's identification number field would have to be indicated as "Pending". Imagine sending the seller's tens of thousands of dollars to the IRS and the IRS places the funds into a holding account with millions of dollar of other FIRPTA with withholders. When the funds are send to the IRS with "Pending" listed on the remittance forms for an identification number, the IRS has no way to identify which taxpayer the submitted fund belong to. This makes the retrieval (refunding) of the withholdings by filing a US tax return extremely difficult, with considerable delay in receiving the refund. Example: We just resolved a case with a similar scenario and it was five year from the time that the taxpayer withholdings were submitted to the time they finally received the refund.
Legacy Tax & Resolution Services (LTRS) has Certified Acceptance Agents on staff to review your identification documents for authenticity so that you don’t have to send the original documents to the IRS and take a chance they get lost. A Certified Acceptance Agent is a person or entity who has been authorized by the IRS to assist individuals and other foreign persons who do not qualify for a Social Security Number but who still need a ITIN to process a 1040NR or other tax schedules.
Legacy Tax & Resolution Services facilitates the application process by reviewing the necessary documents and forwarding the completed forms to the IRS. Once we receive your acceptable documentation, we must complete a face-to-face interview to confirm your identity. To facilitate this meeting we can use apps such as Skype, Zoom, Join.Me, FaceTime, Teams, WeChat, or WhatApp.
Escrow Agent
As detailed above submitting FIRPTA withholdings without an ITIN is a huge mistake. This leaves with the taxpayer (seller) with four options; 1) Apply for the ITIN and submit the withholdings anyway listing "pending" on all the forms. (terrible option) 2) Apply for the ITIN through LTRS and delay the closing until the ITIN is received (not a good option, typically 3 to 6 months and the buyer usually will not wait) 3) Apply for the ITIN through LTRS and ask the Title Company to hold the funds in escrow until the ITIN is received. (Many Title Companies do not offer this service or they will only hold the funds in escrow for a short period of time (typically less than 30 days, again not a great option) 4) Apply for the ITIN number through LTRS and have the Title Company transfer the funds to your secure international escrow account through Currencies Direct. Currencies Direct has been providing secure international escrow accounts for almost thirty year. They are an ideal partner to secure your escrowed funds while your ITIN Application is pending. Once your ITIN application is approved, Currencies Direct will be instructed to transfer the funds to the IRS with digital identification information to link the funds with your ITIN number. LTRS will file your US return to obtain your refund. You will have the option to direct deposit the refund into your Currencies Direct account. This will make the transfer of the fund to your foreign account simple and at favorable exchange rates.
Withholding Certificates
According to IRS.gov, the withholding amount on the sale of US property can be adjusted if the IRS issues a withholding certificate. A withholding certificate is an application for a reduced withholding based on the actual gain of the sale instead of the selling price.
If 15% of the selling price is more than the tax you will owe on this sale, then a withholding certificate may be ideal for you.
Important features to know about withholding certificate applications:
- If the withholding certificate can’t be applied for and issued prior to closing, then typically the buyer gets to decide if the funds need to be remitted within 20 days of the closing or if they can remain in escrow pending the approval or rejection of the application.
- The IRS will generally act on these requests within 90 days after receipt of a complete application
- All parties must have or at least apply for an ITIN to apply for a withholding certificate
- The applicant must be able to prove their basis in the property
- The transferee (buyer), the transferee’s (buyer) agent, or the transferor (seller) may request a withholding certificate.
- A transferor that applies for a withholding certificate must notify the transferee in writing that the certificate has been applied for on the day of or the day prior to the transfer.
FIRPTA Remittance
Persons purchasing US real property from foreign persons, certain purchasers’ agents, and settlement officers are generally required to withhold 15% of the amount realized on the sale or disposition. In most cases, the transferee/buyer is the withholding agent. According to IRS.gov, if you are the buyer of US real property, you must find out if the seller is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax.
The transferee (buyer) must deduct and withhold a tax on the total amount realized (usually the gross selling price) by the foreign person on the disposition. The rate of withholding generally is 15%.
Transferees (buyer) must prepare Forms 8288 and 8288-A to report and pay to the IRS any tax withheld on the acquisition of US real property. This form must be submitted with the required withholding within 20 days of the date of transfer. It is critical for these forms to be prepared correctly as this is the only record the seller will have as proof of funds paid on their account.
Legacy Tax & Resolution Service can prepare these forms with ease one behalf of the transferee (buyer). We work efficiently with the seller, buyer and title company to gather the information needed to accurately prepare the FIRPTA remittance forms. After the remittance forms are mailed to the IRS, we will monitor the forms as they flow through the IRS’s system to make sure they are processed in a timely manner. We will keep all interested parties (Buyer, Seller, Buyer's Realtor, Seller's Realtor, Title Company, etc) informed of the progress.
FIRPTA Problem Resolution
Legacy Tax & Resolution Services is a nation tax resolution firm with dedicated resolution specialists. When it comes to FIRPTA the following are the solutions we offer;
- Correcting incomplete or inaccurate withholding remittance forms.
- Researching the status of outstanding refunds.
- Are you still waiting on your IRS refund? If so, we are here to help!
- Reduction or elimination of IRS penalties
- Resolution of IRS demand letters, notices and much more.
We have an extremely high success rate in resolving FIRPTA cases that weren’t handled properly. Pricing is based on a case by case basis and is typically quoted in a flat fee.
Our FIRPTA Process
Seller Interview
Interview with the seller looking for opportunities for tax reduction, exemption and/or exclusion. Also we will determine if the seller needs to obtain an Individual Taxpayer Identification Number (ITIN).
Buyer Discussion
Discussion with the buyer to make sure the buyer understand their responsibility. Without the follow through services offer by our firm, they are not truely protected from interest and penalties from a failed FIRPTA process
Form 8288-B Application for Withholding Certificate
If time permits before the closing, prepare a Form 8288-B Application for Withholding Certificate for Dispositions by Foreign Persons of US Real Property Interests based in the information obtained in the initial seller interview
A withholding certificate may be issued based on three categories:
- A determination by the IRS that a reduced withholding is more appropriate because either:
- The amount that was originally to be withheld would be more than the seller’s maximum tax liability; or
- Withholding of the lower amount would not jeopardize any collection of the assessed tax.
- The exemption from U.S. tax of all gain realized by the seller; or
- An agreement between the seller and buyer is in place for the payment of tax, which provides security for the tax.
- The applications for withholding FIRPTA certificates are divided into six main categories. These categories provide specific information that is needed to process the applications. The six categories are:
- Applications based on a claim that the transfer is entitled to non-recognition treatment or is exempt from income tax;
- Applications that are based on the calculation of the seller’s maximum tax liability;
- Applications processed under installment sale rules;
- Applications that are based on an agreement for the tax payment with applicable security;
- Applications for blanket withholding FIRPTA certificates; and
- Applications based on any other basis or criteria.
- The applications for withholding FIRPTA certificates are divided into six main categories. These categories provide specific information that is needed to process the applications. The six categories are:
Application for an Individual Taxpayer Identification Number (ITIN) (If Necessary)
If the seller does not have an ITIN , we would obtain an ITIN for the seller
Place FIRPTA Deposit in Our Escrow Account (if Necessary)
*If the seller is pending an ITIN, we would hold the FIRPA Deposit in our escrow account under the seller name and internal account ID.
Seller has Obtained an ITIN (Only if no previous ITIN)
Once the seller has obtained an ITIN, proceed as normal
Complete the FIRPTA Documents (Form 8288, 8288-A, copy A, B, C) and Form 2848 (IRS Power of Attorney) and provide instructions for filing.
If the taxpayer has an ITIN at the time of the closing and a withholding certificate is not appropriate, we would prepare the FIRPTA package for the title company and provide the instructions for processing
If the taxpayer has applied for an ITIN at the time of the closing, the FIRPTA deposit should be transferred to our escrow account for holding and payment, once an ITIN number has been obtained.
If the taxpayer has submitted a withholding certificate at the time of the closing, the FIRPTA deposit should be transferred to our escrow account for holding and payment, once an withholding certificate has been obtained.
File the Signed Form 2848 (IRS Power of Attorney) with the IRS CAF Unit
Filing the signed Power of Attorney allows us to monitor the sellers taxpayer account
Monitor The Seller's Taxpayer Account
Monitor the acceptance of the FIRPTA deposit and the processing of the FIRPTA document using the IRS Power of Attorney and inform the seller, the buyer, the title company and the buyer's agent of the acceptance of the deposit/amount and processing of the documents/date. Each has a vested interest in making sure the FIRPTA process is completed correctly
Prepare the US Return for the Seller (Separate Engagement)
File the appropriate US return for the seller to obtain any remain refund
Our Fees for this Service (Click the link to proceed with this service)
$250.00 Single Taxpayer (requires one set of FIRPTA documents
$295.00 Husband and Spouse (requires two sets of FIRPTA documents
$395.00 Single Entity (requires one set of FIRPTA documents
Supporting Services
As part of our Supporting Services related to FIRPTA, we also offer;
Acquiring an Individual Taxpayer Identification Number (ITIN)
Acquiring an Employer Identification Number (EIN)
Tax Preparation of the US Income Tax Return
* IRS under IRC allow us the place the FIRPTA deposit in an escrow account under the circumstances that it provides security for the eventual payment of the deposit and the deposit is secure and easily identifiable to appropriate the seller. The IRS is very aware that sending in funds with a Form 8288 listing only a name with no ITIN number is very problematic. We have assisted with cases where the taxpayer has spent the better part of a decade trying to obtain their refund, especially if the name on the Form 8288 is a common name.
Check Out These Other Articles and Resources
FIRPTA Withholding Certificate Calculator
Three Really Bad Times to Discover FIRPTA
Is Every Property Under $300,000 Exempt from FIRPTA, NO!
Is Your Seller Foreign Under FIRPTA- Maybe Not!
Definitions of Terms and Procedures Unique to FIRPTA
Who Is Considered a Foreign Seller under FIRPTA
Can the Buyer Rely of the Seller’s Certification That They are not a Foreign Person?
Opportunities for FIRPTA Tax Withholding Reduction, Exemption, and Exclusion for an Entity Seller