Can FIRPTA Withholding Be Reduced Before Closing?

Many foreign sellers are surprised to learn that FIRPTA withholding may potentially be reduced before closing through a properly prepared withholding certificate application.

Under FIRPTA, buyers are generally required to withhold a percentage of the gross sales price when purchasing U.S. real estate from a foreign seller.

However, the withholding amount is not always the seller’s actual U.S. tax liability.

In some situations, the seller’s final tax obligation may ultimately be significantly lower than the required withholding amount.

This is where Form 8288-B — the FIRPTA Withholding Certificate Application — may become important.

When properly prepared and timely submitted, a withholding certificate application may allow:

• reduced withholding

• suspension of withholding remittance pending IRS review

• faster access to excess funds after closing

Timing is extremely important.

In many cases, withholding certificate applications should be submitted on or before the closing date in order to preserve important procedural protections.

Unfortunately, many foreign sellers first learn about FIRPTA only days before closing, leaving limited time for planning.

At FIRPTArefunds.com, we assist foreign sellers, buyers, attorneys, and settlement agents with FIRPTA withholding certificates, ITIN coordination, and FIRPTA compliance support.

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