IRS FIRPTA: Foreign sellers? Big Penalties May Apply by Not Complying with US FIRPTA Laws! Get Tips Here to avoid using the wrong new applicable FIRPTA Tax Withholding Rates !

The recent FIRPTA rules changes increased the withholding tax & rate to be 15%  paid by foreign sellers of certain properties (effective since Feb. 16, 2016) !!

The FIRPTA Tax Rate applicable may be now 15% (versus the old 10% rate) on properties selling for US $1 Million  or more.

However, the 10% rate may apply for properties selling for under $1 Million (Note: Only if it meets and subject to the IRS criteria to be still eligible for the 10% rate).  Otherwise the new 15% rate may apply to certain transactions – even to those under $1 million!

Should you have questions or need help with FIRPTA,  or need Business or Individual tax advice, out firm is available via phone at (305) 672-4272  – as well as via e-mail at DAVID@CPA-FL.COM.  Our Firm Website is WWW.CPA-FL.COM

See our Firm Video on FIRPTA:

According to the FIRPTA Rules –  if a person is a US Non-Resident Foreigner and disposes of an interest in U.S. real property, that transaction (and the parties to the transaction) are subject to FIRPTA tax withholding.

The mere ‘disposition’ or transfer of real property by a foreign person can trigger the withholding tax of the minimum 10% -15%  (the newer applicable 15% rate for transactions over $1 million & 15% may be applicable on certain transactions even under $1 million per recent new IRS criteria.)

The tax act puts a duty for a tax withholding of a minimum 10% – 15% tax  (the newer applicable 15% rate for properties transferred/selling for over $1 million – & 15% on certain transactions under $1 million per IRS criteria – per the 2015 PATH Tax Act effective since February 16th, 2016) on the net proceeds on the purchaser(s), sellers, real estate agents and escrow agents such as the title company or law firm performing the closing.

The good news is that there are some exceptions provided for the FIRPTA withholding tax applicable – however it is important to note that these are not all automatically applicable.  Often, an Early Withholding Exemption Application must be filed with the IRS in advance of a real estate closing – in order to obtain a written determination of the actual withholding tax or exemption applicable to the transaction.

Also important to note is that If the IRS deems you are a responsible party for the FIRTPA withholding tax and you neglect to do so, you may be held liable for the tax!

If there is a moral to this story – it would be that if you are a realtor, purchaser, or real estate attorney who represents a foreign non-resident person, foreign entity or even a U.S. entity which is owned by a foreign person it is critical that you insist that the purchaser or seller seek the advice and formally engage a Certified Public Accountant or Tax Attorney to advise how the FIRPTA laws may apply to their particular situation.  The office of David L Wrubel, CPA, PA can be of assistance in this capacity.

Should you have questions or need help with FIRPTA as well as need Business or Individual Tax Advice:

Our firm may be contacted at: 

PHONE:  (305) 672-4272  [4CPA]






Bookmark and Share 

Leave a Reply