Principal Brokers… Are You FIRPTA Prepped?

Principal Brokers: Are You FIRPTA Prepped?

Are you protecting your firm from the financial liability of mishandling a FIRPTA transaction?

Are you giving your clients what they need to know through your agents?

Is your closing agent experienced in FIRPTA?

Do you have a qualified professional FIRPTA resource when you need one?

A foreign seller enters one of your brokerage's transactions.

Does your agent recognize the FIRPTA issue? More importantly, does your agent know what to do next—and where to turn?

FIRPTA generally requires a buyer purchasing U.S. real property from a foreign seller to withhold 15% of the amount realized and remit it to the IRS. The withholding is based on the sale amount—not the seller's profit—and exceptions or reduced withholding may apply.

For a principal real estate broker, being FIRPTA prepped doesn't mean turning your agents into tax professionals.

It means having the knowledge, procedures and professional resources in place before a FIRPTA transaction lands on someone's desk.

FIRPTA Can Involve a Lot of Money

The numbers get everyone's attention.

On a $1 million transaction, 15% withholding can mean $150,000.

On a $5 million transaction, it can mean $750,000.

When those amounts are involved, discovering a FIRPTA problem shortly before—or after—closing is not where anyone wants to be.

Early recognition gives the parties and their professionals time to determine what FIRPTA requires, whether an exception applies, whether reduced withholding may be available, whether an ITIN is needed, and what must be prepared before closing.

Are You Protecting Your Firm?

The buyer generally has the primary responsibility for FIRPTA withholding and remittance to the IRS. But that does not mean real estate brokers and agents have no exposure.

Federal FIRPTA rules also address agent liability. Under certain circumstances, an agent who has actual knowledge that a seller's certification of nonforeign status is false and fails to notify the buyer can face financial liability.

That is one reason FIRPTA awareness should begin before the closing table.

For a more detailed discussion of these rules, see our Liability Pitfalls for Buyers, Sellers and Agents.

Are Your Agents Giving Clients What They Need to Know?

Your agents do not need to become FIRPTA experts, accountants or tax advisers.

They do need to recognize when FIRPTA may be involved.

A foreign seller should not reach the final stages of a transaction before someone begins asking basic questions about withholding, identification numbers, exceptions, withholding certificates and IRS filings.

An agent who identifies the issue early can help the client obtain qualified assistance while there is still time to evaluate the available options.

That can make a very different client experience from discovering a six-figure withholding requirement at closing.

Is Your Closing Agent Experienced in FIRPTA?

Not every closing professional handles FIRPTA transactions regularly.

FIRPTA can involve much more than calculating 15%.

Depending upon the transaction, there may be Forms 8288 and 8288-A, withholding-certificate applications, ITIN issues, exemptions or exceptions, buyer and seller documentation, remittance requirements and post-closing matters.

Principal brokers should know whether the professionals handling their transactions have the FIRPTA experience necessary for the situation—or whether additional specialized assistance is needed.

Do You Have a Qualified FIRPTA Resource?

The time to find a FIRPTA professional is not when everyone is sitting at the closing table.

Having a qualified resource available gives your agents somewhere to turn when they encounter a foreign seller, a foreign buyer, an unfamiliar exemption, an ITIN problem or another FIRPTA question.

The agent doesn't have to diagnose the problem.

The agent needs to recognize it and know where to send it.

FIRPTA for Principal Brokers: Are You Prepped?

Your agents don't need to become FIRPTA experts. Give them access to the knowledge and professional resources they need when FIRPTA enters a transaction.

FIRPTA Refunds, LLC makes it easy to get FIRPTA compliant with confidence.

For your closing agents: Our Forms-Only Paid Preparer service starts at $120 for the first foreign seller for preparation of Forms 8288 and 8288-A, with additional sellers at $60 each.

For your brokerage: Bring FIRPTA education directly to your agents with our 45-minute expert FIRPTA presentation, followed by Q&A, for your next brokerage meeting.

For your transactions: FRllc provides specialized FIRPTA assistance covering withholding, ITINs, withholding certificates, exemptions and exceptions, year-end filings, refunds and IRS matters.

Be prepared before the next foreign seller walks through your door.

Recognize it. Refer it. Get it right.