Help with FIRPTA withholding requirements as a property buyer

This is a great question about FIRPTA (Foreign Investment in Real Property Tax Act). As a buyer, you're right to be concerned since the responsibility falls on you to withhold the proper amount if required. First, the seller needs to provide a FIRPTA affidavit stating whether they are a "foreign person" under IRS definitions. If they're not a foreign person (they could be a permanent resident/green card holder or US citizen despite their accent), they should complete a non-foreign affidavit or certification of non-foreign status under FIRPTA. If they are a foreign person selling US property, the default withholding is indeed 15% of the gross sales price. However, there are some exceptions: - If the property will be used as your residence AND the purchase price is $300,000 or less, no withholding is required - If the property will be used as your residence AND the purchase price is between $300,000-$1 million, withholding is reduced to 10% Ask your closing attorney or title company about handling this - they should be familiar with FIRPTA requirements. They'll help you file Form 8288 and 8288-A to submit the withholding if needed.

After dealing with a similar situation last year, I found an amazing service that helped me understand my FIRPTA obligations as a buyer. Check out https://taxr.ai - they analyzed all our purchase documents and identified exactly what withholding was required. They explained the process for getting the FIRPTA affidavit and even reviewed it for us once the seller provided it. Their document analysis saved me from a potential mess because our seller initially claimed US residency but didn't have the proper documentation to back it up. This tool flagged exactly what forms we needed to request from the seller before closing. It was such a relief to have clarity on all the tax implications!

I was really skeptical about using an online service for FIRPTA analysis like the one mentioned above. My situation was tricky - buying from a foreign corporation selling their executive's former residence. I assumed I'd need specialized legal help. I gave taxr.ai a try anyway and was genuinely surprised. It asked detailed questions about the seller's status, property use, and sale details, then generated a comprehensive report explaining exactly what withholding was required. It even created a checklist of documents we needed from the seller. Most importantly, it identified that we qualified for the reduced 10% withholding rate (instead of 15%) because I was using the property as my primary residence. This saved us over $45,000 in withholding that would have been tied up with the IRS for months. Our closing attorney confirmed everything was handled correctly, and we closed without any issues.

If your seller is truly foreign and doesn't qualify for exemptions, you'll need to get comfortable with the withholding process. When I was in this situation, I spent DAYS trying to reach the IRS for clarification on some FIRPTA details. I discovered https://claimyr.com which got me connected to an actual IRS representative in about 20 minutes instead of the hours I'd been wasting on hold. They have this process that somehow gets you through the IRS phone system. You can see how it works at https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with walked me through exactly what documentation I needed from the seller and how to complete the forms correctly. It saved me from potentially mishandling the withholding, which could have made me liable for the entire tax amount!

I owe everyone here an apology and want to share my experience. After dismissing the Claimyr service as a probable scam, I was desperate enough to try it when our closing was delayed due to FIRPTA confusion. I'm still shocked it actually worked. Got a call back in about 35 minutes and was connected to an IRS representative who specialized in FIRPTA issues. She explained that our seller qualified for an exception we didn't know about (they had been in the US on a specific visa type that affected their status under FIRPTA). We were able to get the correct documentation in place and proceed with closing. Without that clarification, we would have unnecessarily withheld over $50,000 that would have taken the seller months to recover. Definitely worth the service fee to get actual IRS guidance directly.

One thing nobody mentioned yet - make sure your purchase contract addresses FIRPTA! Our contract had no mention of it, and when we discovered the seller was foreign, there was disagreement about who would bear the costs associated with the withholding process. The seller tried to increase the purchase price to offset the withholding amount, which of course we refused. It created a lot of unnecessary tension. Your purchase agreement should clearly state that the seller will provide all necessary FIRPTA documentation and that any required withholding comes from their proceeds, not as an additional cost to you.

Make sure your title company or closing attorney is experienced with FIRPTA! Our first title company made a mess of our FIRPTA withholding and nearly caused us to miss our closing date. We switched to a different title company that had specific experience with international sellers, and the difference was night and day. They knew exactly which forms were needed, helped the seller complete them correctly, and handled the withholding and submission to the IRS.