FIRPTA Compliance
Navigate the Complex Foreign Investment Withholding Requirements With Confidence
The Foreign Investment in Real Property Tax Act (FIRPTA) creates complex tax withholding obligations that can derail real estate transactions, create unexpected tax liability, and result in significant IRS penalties when mishandled. Whether you are a foreign seller, a U.S. buyer acting as a withholding agent, or a real estate professional closing transactions involving foreign parties, our FIRPTA specialists ensure full compliance and help you avoid costly mistakes.
What Is FIRPTA?
The Foreign Investment in Real Property Tax Act (FIRPTA), enacted in 1980, requires the buyer (the "withholding agent") in a real estate transaction to withhold a percentage of the gross sale price and remit it to the IRS when the seller is a "foreign person" — a non-resident alien, foreign corporation, foreign partnership, trust, or estate. The standard withholding rate is 15% of the gross sale price for transactions over $1 million, 10% for sales between $300,001 and $1 million, and 0% when the buyer intends to use the property as a primary residence and the price is under $300,000. Failure to withhold exposes the buyer to full liability for the tax that should have been withheld. Sellers can apply for a withholding certificate (Form 8288-B) to reduce or eliminate withholding if their actual tax liability is lower than the withholding amount.
How It Works
Transaction Assessment
We assess the specific FIRPTA implications of your transaction — seller status, property type, sale price, and applicable withholding rates.
Withholding Certificate Application
For sellers whose actual tax liability is less than the required withholding, we prepare and submit Form 8288-B to the IRS to reduce or eliminate withholding — potentially keeping millions in proceeds available at closing.
Buyer Compliance
We ensure buyers (withholding agents) properly withhold, file Form 8288 and 8288-A within 20 days of closing, and remit the required amount to the IRS.
Tax Return Filing
Foreign sellers must file a U.S. tax return to report the sale and claim a refund of any over-withheld amounts. We prepare and file all required returns.
Exemption Analysis
We identify all available exemptions and treaty benefits that could reduce or eliminate FIRPTA withholding requirements for your specific transaction.
Who Should Consider This?
- ✓Foreign individuals, corporations, or entities selling U.S. real property
- ✓U.S. buyers purchasing property from foreign sellers
- ✓Real estate agents, attorneys, and closing professionals managing FIRPTA transactions
- ✓Foreign sellers seeking withholding certificates to reduce IRS holds
- ✓Foreign entities that owned U.S. real property interests that have been transferred
- ✓Trustees and executors of estates with U.S. real property interests
Key Benefits
Reduce Withholding
A withholding certificate can dramatically reduce the amount withheld at closing, keeping more proceeds in your hands.
Protect Buyers
Proper compliance protects buyers from unexpected IRS liability for failing to withhold.
Close Transactions
We resolve FIRPTA issues efficiently so your real estate transaction can proceed and close on schedule.
Full Filing Support
We prepare all required IRS forms, returns, and correspondence from start to finish.
Ready to Resolve Your FIRPTA Compliance Issue?
Free consultation. No obligation. A licensed tax attorney will call you within 5 minutes.
Frequently Asked Questions
What is the penalty for a buyer who fails to withhold under FIRPTA?+
The buyer becomes personally liable for the full amount that should have been withheld, plus interest and penalties. This can be a significant amount on large transactions.
How long does it take to get a withholding certificate?+
The IRS typically processes Form 8288-B applications within 90 days. We recommend applying well in advance of closing. In some cases, the IRS can process applications faster for time-sensitive transactions.
What if the closing happens before the withholding certificate is approved?+
You may still close, but the buyer must withhold at the standard rate. Once the certificate is approved, excess withholding is released. We coordinate closely with title companies to handle this properly.
Does FIRPTA apply to commercial property as well as residential?+
Yes. FIRPTA applies to all U.S. real property interests regardless of property type — residential, commercial, industrial, vacant land, and certain corporate interests.
Related Services
IRS Audit Representation
Licensed tax attorneys represent you through every type of IRS audit examination to protect your rights and minimize your liability.
Offer in Compromise
A government-approved program that lets qualifying taxpayers settle their IRS debt for a fraction of the full amount.
Tax Liens
Federal Tax Liens attach to all your property and crush your credit score. We know exactly how to get them withdrawn, released, or discharged.