Why Delaying FIRPTA Compliance Until Closing Can Be an Expensive Mistake
- Richard Kahn
- 11 hours ago
- 2 min read
Many FIRPTA problems are not caused by the
transaction itself.
They are caused by waiting too long to address FIRPTA requirements.
A common misconception is that FIRPTA can simply be handled at closing. In reality, some of the most valuable planning opportunities often occur weeks or even months before closing takes place.
When FIRPTA is identified early, foreign sellers and their advisors have time to evaluate available options, gather documentation, address ITIN issues, prepare withholding certificate applications when appropriate, and coordinate with all parties involved in the transaction.
When FIRPTA is discovered late, the results can be very different.
Why Early FIRPTA Compliance Matters
• Delayed closings
• Excess withholding
• Missing documentation
• Increased professional fees
• Buyer and agent liability concerns
• Refund delays after closing
Many buyers, sellers, agents, attorneys, and closing professionals are surprised to learn that FIRPTA withholding and final tax liability are often two very different numbers.
The earlier a transaction is reviewed, the greater the opportunity to understand available options and determine whether planning opportunities exist.
While not every transaction qualifies for reduced withholding or specialized treatment, early evaluation allows parties to make informed decisions before deadlines begin to dictate the process.
What We Commonly See in Practice
One of the most common FIRPTA issues we encounter is not the withholding itself—it is the timing.
Frequently, sellers, buyers, agents, attorneys, or closing professionals contact us only days before closing after discovering that FIRPTA applies to the transaction.
By that point, available options may be limited, deadlines may be approaching, and decisions often need to be made quickly.
While every transaction is different, early review often provides more flexibility, more planning opportunities, and fewer surprises at closing.
The earlier FIRPTA is addressed, the more likely it is that all parties can evaluate available options before timing becomes the primary constraint.
The Bottom Line
The best time to address FIRPTA is usually before a closing date is approaching.
Early planning helps reduce risk, improve compliance, and avoid unnecessary surprises.
Need Assistance?
FIRPTA Refunds assists foreign sellers, buyers, agents, attorneys, and closing professionals with FIRPTA withholding compliance, withholding certificates, ITIN processing, refund claims, and related filing requirements.
If you have an upcoming transaction, contact us early in the process to discuss your options.
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