FIRPTA TAX WITHHOLDING ON FORM 8288A ON THE SALE OF YOUR USA-BASED HOME /LAND /TIMESHARE / WARRANTY DEED/TRUST/INHERITED PROPERTY
FIRPTA, FORM 8288A & FORM 8288B
What is FIRPTA Tax?
When any foreign person sells his USA-based property and if this foreign-based seller does not have a valid SSN or ITIN to claim a withholding exemption claim then these individuals are subject to the FIRPTA TAX withholding as per the (Foreign Investment in Real Property Tax Act) at the rate of 10% or 15% of the Gross Proceeds by the US Escrow/Selling agent. For example, the US property sale price is $100,000×15% = $15,000. You would see this Federal tax FIRPTA TAX withheld numbers on Form 8288A.
When Form 8288A or Form 8288B is issued?
Form 8288 A – Issued after the sale or disposition of USA property with completed details of the sale price, Federal tax withholding, date of sale, address of the property, withholding escrow agent’s name. The 10% or the 15% tax on sale proceeds are reported on this form.
Form 8288 B – Prepared and submitted by the purchaser or seller 3 months before the sale or closing of the contract of sale to the IRS with a request for the reduced tax or exemption from FIRPTA tax withholding. A transferor looking to reduce or eliminate the FIRPTA withholding amount must file Form 8288-B.
Do you need an ITIN number to complete Form 8288A or Form 8288B?
Yes, ITIN or SSN is needed on these forms
What to do if you do not have an ITIN ready for the sale of USA-based property?
If you have a potential buyer ready to close the transaction then inform the escrow team to mention on Form 8288A or Form 8288B as “ ITIN Applied For” The reason is that the ITIN processing time is 6 to 10 weeks and the buyer would not wait long and you might miss out on a good deal. The worst case scenario if no ITIN is available is 15% FIRPTA tax withheld on the Sale Proceeds and if the capital gain on this sale is less than $44,000, you can claim back the excess taxes paid via nonresident Alien tax return by filing the following year.
Please refer to our earlier blogs for a detailed explanation of the FIRPTA Process FIRPTA
If the completed ITIN application is not correct or Form 8288B is incorrectly completed then IRS will reject the ITIN application, and the attached Form 8288-B will not be processed.
We are one of the IRS-approved Certified Acceptance Agents CAA with many years of experience dealing with IRS ITIN applications and Federal tax return refund claims. If you are looking for expert advisory tax reclaim or ITIN application service with passport certification and to ensure ITIN is approved with a 100% success rate reach out to US via our website with the service required.
