Every closing asks the FIRPTA question.
FIRPTA is an every-file problem. Federal law requires the question on every transaction. When it is missed, the IRS can bill the buyer personally. We screen every file and document the answer, with determination guidance from a licensed CPA firm.
Non-foreign affidavit
File 4253-9907214
Seller: A. Ostrander, a United States person.
Property: Lot 7, Block 3, Harlow Ridge Addition, Spokane County, Washington.
The seller certifies non-foreign status under penalty of perjury. The determination basis stays in the file.
- Seller status verified
- Non-foreign affidavit signed
- TIN on file
- Certificate issued
A 1980 law that collects the tax while the money is still in the room.
When a foreign person sells U.S. real estate, a slice of the gross price, usually 15 percent, is held back and sent to the IRS. The buyer is the withholding agent. If the withholding is missed, late, or wrong, the IRS can assess the full amount, plus interest and penalties, against the buyer personally.
- The amount withheld is a deposit, not the tax the seller actually owes. The difference is refundable only if a nonresident return gets filed.
- On a $750,000 sale the 15 percent holdback is $112,500. If the tax actually owed is about $37,500, about $75,000 is waiting as a refund.
- About 120,000 residential transactions a year fall inside the statute.
Two questions. Three outcomes.
Will the buyer live in the property as a primary residence, and what is the sale price? Profit, tax bracket, and how long the seller held the property do not set the rate.
- 15 percent is the default: the buyer will not occupy, the buyer is an entity, or the price exceeds $1,000,000.
- 10 percent when the buyer will occupy and the price is between $300,001 and $1,000,000.
- 0 percent when the buyer will occupy and the price is $300,000 or less. Rare in practice.
Three tiers. One answer on every file.
Detection runs inside the examination workflow. Determination guidance comes from a licensed CPA firm. Files that need professional judgment or full compliance go to that firm. Software routes the work. It does not stand behind the determination.
- Tier 1, FIRPTA cleared: a U.S. person verified during examination, with the determination in the file.
- Tier 2, determination required: passport, trust, and entity questions. A written answer in 3 to 5 business days.
- Tier 3, FIRPTA applies: ITIN (Form W-7) through a Certified Acceptance Agent, Forms 8288 and 8288-A, withholding certificate 8288-B, and the 1040-NR refund.
One file on the desk. Run it for $10.
Answer a short set of questions about the sellers, buyers, property, and sale. Every exemption is checked, any withholding is calculated, and you get a certificate with a verification code anyone at the table can scan. No subscription. Pay per determination, or redeem a partner code.
- Results in minutes, any time of day.
- The decision trail stays on the certificate.
- If the answers need judgment, we point you to the CPA firm.
- QuestionsSellers, buyers, price
- ResultMinutes
- CertificateCode 4253-9907214
The withholding is rare. The question is on every file.
The question is on every file.
The seller certifies non-foreign status under penalty of perjury, or the withholding workflow starts. That includes the files where the answer is does not apply.
The buyer is personally liable.
The statute makes the buyer the withholding agent. A missed foreign seller can follow the buyer for the full amount, plus interest and penalties, years later.
The closer is in the middle.
Underwriters say not to decide foreign status at the table and not to prepare Form 8288 in-house. The buyer still expects the settlement agent to handle it.
The deadline does not wait.
When FIRPTA applies, forms and payment must reach the IRS within 20 days. The usual failures are clerical: the wrong name, a check without the forms, a missing tax ID.
Common questions.
Who counts as foreign under FIRPTA?+
A seller is foreign if they are not a U.S. person. A U.S. person is a citizen, wherever they live, a green card holder, or someone who meets the substantial presence test. Everyone else is foreign, including foreign corporations, partnerships, and trusts. About 95 percent of foreign sellers in residential deals are individuals. Entity and trust structures are where the hard calls live.
If the seller signs the non-foreign affidavit, is the file done?+
Mostly, yes. A non-foreign certification signed under penalty of perjury, with the seller tax ID, generally protects the buyer unless the buyer knows it is false. The files that need a professional determination are the ones where the seller will not sign, hesitates, has a foreign address or foreign wiring instructions, or where the entity makes the answer unclear. You only find those by screening every file.
Why can closers not make the call themselves?+
Underwriters tell them not to. Foreign status is a legal and tax judgment, and making it at the closing table creates claims exposure. The same guidance warns against preparing Form 8288 in-house. The expensive errors are a title company name on the buyer form, a payment the IRS cannot match, and a filing rejected for a missing tax ID.
What has to happen when FIRPTA applies?+
The withholding, usually 15 percent of the gross price, is debited from the seller proceeds at closing. Within 20 days, Form 8288 and Form 8288-A must reach the IRS with the payment. The IRS stamps a copy back to the seller. About 80 percent of foreign sellers also need a U.S. tax ID (ITIN) first. After December 31, a nonresident return can recover the amount that was overwithheld.
Is the withheld money gone for good?+
No. The withholding is a deposit against the tax the seller actually owes, which is almost always lower. The difference comes back through a 1040-NR refund, often tens of thousands of dollars. In the usual workflow most foreign sellers never file. Tier 3 includes that refund filing.
Can the withholding be reduced before closing?+
Sometimes. A withholding certificate application (Form 8288-B) filed before closing asks the IRS to cap the holdback at the tax the seller actually owes. The funds sit in escrow while the IRS reviews, usually for several months. The gain calculation is CPA work, and that is the work the partnership covers.
Who stands behind the determination?+
A licensed CPA firm provides the determination guidance. Files that need professional judgment, research, or full compliance go to that firm. TitleTools provides the screening, detection, and workflow. This page is general information, not legal or tax advice for a specific transaction. Software cannot stand behind the determination.
Put a professional FIRPTA answer on every file.
Tell us about the operation and the volume. We will show the screening inside examination, the determination letters, and the cost per file.
Need one answer today? Run one determination online for $10. Or hello@limelyte.com · 509.241.0138.
TitleTools provides screening and workflow. Determination guidance comes from a licensed CPA firm, which also handles research, compliance, and tax services. Nothing on this page is legal or tax advice for a specific transaction.