FIRPTA 15% withholding tax - does IRS pay interest on delayed processing?

The short answer is yes, the IRS does pay interest on FIRPTA withholdings when they take longer than 45 days to process a refund after receiving a complete application for a withholding certificate (Form 8288-B). The interest calculation starts 45 days after the IRS receives your complete application. The interest rate changes quarterly and is based on the federal short-term rate plus 3 percentage points. Currently that's around 7-8% depending on the quarter. The good news is that the interest is calculated daily and compounds, so the longer they take, the more interest you'll receive. When you finally receive your refund check, it will include both your principal amount and the calculated interest. You don't need to file anything additional to request this interest - it's calculated automatically by the IRS.

I went through the exact same situation last year when selling my rental property to a buyer from Canada. The 90-day timeframe was a complete joke - my FIRPTA application took 11 months to process! I discovered taxr.ai (https://taxr.ai) after struggling for months trying to get updates on my application. Their document analysis tool helped me figure out that my application was likely delayed because I had made a minor error in how I calculated the maximum tax liability section. The tool spotted inconsistencies between my purchase documentation and my withholding certificate application that I hadn't noticed. I was able to submit a corrected application with their guidance, which finally got processed. The best part was being able to track exactly what was happening with my case instead of being completely in the dark. Definitely worth checking out if you're dealing with FIRPTA issues.

I wanted to follow up on my previous comment about taxr.ai. I was definitely skeptical at first, but after waiting 4 months with no FIRPTA updates, I decided to give it a try. The system actually found two issues with my 8288-B application that likely were causing delays - I had inconsistent information between my purchase documents and my reported basis, plus I had calculated my maximum tax liability incorrectly. I called the IRS with this specific information and was able to provide clarification. My refund was processed within 6 weeks after that call. The interest payment was substantial too - almost $3,800 on my $62,000 withholding. So yes, they definitely do pay interest on delayed processing!

If you're frustrated with waiting on your FIRPTA refund and can't get through to anyone at the IRS, I highly recommend using Claimyr (https://claimyr.com). I was in exactly your situation - 7 months waiting with over $100K tied up in FIRPTA withholding. After trying for weeks to reach someone at the IRS and sitting on hold for hours, I gave up and tried Claimyr. You can see how it works here: https://youtu.be/_kiP6q8DX5c. Their system got me connected to an actual IRS agent in about 25 minutes, when I had been unable to get through at all previously. The agent I spoke with was able to locate my application, confirm it was complete but backlogged, and flag it for expedited processing based on the excessive delay. They also confirmed the interest calculation would be applied automatically.

I need to eat my words from my previous comment. After seeing no progress on my FIRPTA refund for 8 months and getting nowhere with the regular IRS number, I decided I had nothing to lose and tried Claimyr. Within 30 minutes I was actually speaking to a real IRS agent who specialized in FIRPTA cases! The agent found my application and saw it had been flagged for additional review because my reported purchase price documentation was unclear. I was able to clarify the issue right on the call, and she put notes in my file to update the processing team. My refund with interest (about $5,400 in interest on an $86,000 withholding) was issued three weeks later. I've never been so happy to be wrong about something. If you're dealing with FIRPTA delays, definitely worth getting someone on the phone who can actually look at your specific case.

I'm a real estate attorney who handles a lot of foreign investor transactions. One thing to keep in mind with FIRPTA is that the 8288-B applications are facing unprecedented delays right now because of staffing issues at the IRS. These applications are handled by a specific, small division. While the IRS does pay interest (as others have mentioned), there are a few strategies I recommend to my clients to reduce FIRPTA withholding upfront rather than waiting for a refund: 1. Consider structuring the sale to qualify for the reduced 10% withholding if the property will be used as a residence and sells for under $1 million 2. Make sure your application clearly documents your adjusted basis with all eligible improvements to maximize your reduction request 3. Submit impeccable documentation with your 8288-B - unclear or missing info is the #1 reason for delays

Does anyone know if using a tax professional to prepare the 8288-B speeds up processing? My CPA wants to charge me $1,200 to prepare the form and says it will "expedite" the process, but I'm skeptical.

I'm currently dealing with a similar FIRPTA situation and wanted to share what I've learned from my tax attorney. The interest calculation that others mentioned is correct - it starts 45 days after the IRS receives your complete application. However, there's an important distinction: the IRS considers an application "complete" only when they have all required documentation in acceptable format. One thing that's helped me track my timeline is keeping detailed records of when I submitted everything and any correspondence from the IRS. I also discovered that if you need to submit additional documentation after your initial filing, the 45-day clock resets from when they receive the supplemental materials. For what it's worth, I submitted my 8288-B in January and I'm still waiting 10 months later. The interest will definitely help offset some of the frustration, but it's still incredibly disruptive to have $90K tied up for this long. I've been considering some of the services mentioned here to try to get an actual human at the IRS to look at my case.

I'm dealing with almost the exact same situation right now - submitted my 8288-B back in March for a $68,000 withholding and I'm still waiting 8 months later! It's incredibly frustrating to have that much money tied up, especially when the IRS's own website says 90 days. Based on what I've read here, it sounds like the interest does help somewhat, but I'm curious about the practical side - does anyone know if there's a way to estimate how much interest you'll receive while you're waiting? With rates around 7-8% as mentioned, I'm trying to figure out if it's worth pursuing some of these services to get faster resolution or just waiting it out. Also, has anyone had success with congressional inquiry? I've heard that sometimes contacting your representative's office can help move things along when federal agencies are taking excessively long to process applications.