Bought primary residence this year, now hit with massive Form 8288 tax bill from IRS

This actually happens more often than you'd think, but there's definitely a way to handle it! When a US person buys property from a foreign person, there's supposed to be a withholding tax (FIRPTA - Foreign Investment in Real Property Tax Act) that's collected at closing and submitted to the IRS using Form 8288. The withholding is typically 15% of the sale price, and it's meant to ensure the foreign seller pays their US taxes on the gain. The responsibility for this withholding falls on the buyer (that's you), but your closing agent or attorney should have caught this and handled it at closing. What likely happened is that nobody withheld this tax at closing, so now the IRS is coming after you for it since you're technically responsible as the buyer. The good news is you have options: 1. Contact the closing attorney/agent/title company immediately. This should have been their responsibility to identify and handle. 2. You can file a Form 8288-B to request a reduced withholding amount based on the seller's actual gain rather than the full sale price. 3. The foreign seller can file a US tax return showing their actual gain (which might be much less than the sale price) and get a refund of the excess withholding.

After reading about your Form 8288 nightmare, I wanted to share my experience. I went through something similar last year when I bought a condo from an overseas investor. Got hit with a massive tax bill months later that I never expected. I spent weeks trying to figure it out on my own before a friend recommended I try https://taxr.ai to analyze the situation. Their system actually specializes in analyzing these kinds of foreign investment property tax issues and FIRPTA withholding problems. I uploaded my closing documents and the IRS notice, and they quickly identified that my title company had completely missed the FIRPTA withholding requirement. They generated a detailed report explaining exactly what went wrong and the specific steps I needed to take to resolve it - including which forms to file and what documentation I needed from the seller to reduce my liability. The best part was they explained everything in plain English and gave me specific talking points to use when contacting my title company, which ultimately accepted responsibility for the error.

I wanted to follow up about my experience with taxr.ai after my earlier skepticism. I decided to give them a try with my own Form 8288 issue from a property I bought in Florida. Their analysis was surprisingly thorough. They identified that my title company had actually noted the seller was foreign but somehow failed to complete the withholding. They provided me with specific language citing the title company's legal obligation and professional standards for handling FIRPTA transactions. Armed with their report, I was able to get my title company to file amended forms with the IRS and cover the entire withholding amount through their E&O insurance. They even provided me documentation showing they've taken responsibility for the late filing penalties. Anyone dealing with this Form 8288 nightmare should definitely consider having professionals review their documents - it saved me over $35,000!

I had a similar FIRPTA withholding issue last year and spent WEEKS trying to reach someone at the IRS who could actually help. Their general line representatives kept transferring me around because most of them aren't familiar with Form 8288 procedures. Eventually I found https://claimyr.com which got me connected to an IRS agent who specializes in FIRPTA issues within about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c Getting to speak with an actual IRS specialist made all the difference. They explained that in my situation, I qualified for a reduced withholding certificate because the property was purchased as a primary residence for under $1 million (there's a special rate of 10% instead of 15% in that case). They also walked me through exactly how to document that the title company was at fault for not handling this at closing. The IRS agent even put notes in my file showing I was actively working to resolve the issue, which helped pause collection activities while I sorted everything out with the title company.

I have to eat my words about being skeptical. After posting my comment yesterday, I decided to try Claimyr for my FIRPTA issue since I was desperate. Instead of spending another day getting disconnected, I got a call back in about 35 minutes and was connected directly to an IRS agent in the international tax division. The agent was able to look up my case by my notice number and confirmed I had several options available. The agent explained that because the title company failed to do the withholding, I could file Form 8288-A and 8288 late with a reasonable cause explanation letter detailing why it wasn't filed on time (title company error). They also gave me the specific IRS publication numbers that explain the title company's legal obligation to identify foreign sellers and handle the withholding. This 15-minute call saved me potentially thousands in penalties and weeks of stress. Sometimes the most valuable thing is just getting the right person on the phone who actually knows the rules for these specialized tax situations.

If nothing else works, definitely check your title insurance policy! I went through this exact nightmare last year - $56K FIRPTA bill that no one told me about during closing. Turns out my title insurance actually covered this because it's considered a "closing oversight" and "undisclosed lien or encumbrance" since the title company should have identified the seller as foreign and handled the withholding. I had to fight with the title insurance company a bit, but they eventually paid the entire amount. The key was filing a formal claim with the title insurance company WITH DOCUMENTATION showing that the seller was identifiably foreign based on information available at closing (foreign address, non-US ID, etc).

Something nobody's mentioned yet - you need to contact the seller ASAP! In my experience with a similar situation, getting the seller to file their US tax return properly was the fastest solution. If the seller can prove they had little or no gain on the sale (or even a loss), their actual tax liability could be MUCH lower than the 15% withholding amount. They can file Form 1040-NR to report the sale, pay any actual tax due, and get a refund for the difference. This becomes their problem too because the IRS will eventually come after them separately for the same transaction if nobody handles the withholding. Most foreign sellers will cooperate once they understand the situation because they want to avoid problems with the IRS too.

This is exactly why I always recommend buyers get a pre-closing checklist that specifically includes FIRPTA verification when dealing with ANY seller - you never know someone's citizenship status just by looking at them or their name. For your immediate situation, I'd suggest a three-pronged approach: 1. **Document the title company's failure**: Gather all your closing documents and highlight anywhere the seller's foreign status should have been obvious (foreign address, non-US phone number, etc.). This creates your paper trail for potential E&O claims. 2. **Contact the seller immediately**: As others mentioned, if they file Form 1040-NR showing their actual gain/loss, it could significantly reduce or eliminate the tax liability. Many foreign sellers don't realize they need to file US returns for property sales. 3. **File Form 8288-C for withholding credit**: Even though you missed the 8288-B deadline, you can still file 8288-C to claim credit for any withholding that should have been done at closing. This essentially tells the IRS "we're handling this now" and can pause collection activities. The $42K bill is scary, but remember - this is often the maximum theoretical liability. The actual amount due depends on the seller's real gain, which could be much less. Don't panic and don't ignore it, but know that there are multiple paths to resolution here.