FIRPTA for Title Company/Law Firm

Armed with the right tools for the job, closing a transaction for a foreign Seller can be a breeze. FIRPTA is one of the most confusing issues with rampant misinformation. Our job is to provide a clear and simple path for closing the transaction on time and with satisfied clients – every time!

How do I know if the Seller is foreign?

Hopefully, the Realtor has already confirmed whether or not the Seller is foreign. If not, look for clues that might indicate FIRPTA applies, such as a foreign address or bank account, large cash transactions and confusion on whether or not they have a Social Security Number or if that number starts with a 9. For more information on ITINs click here. Canadians can be especially tricky because a Canadian Social Insurance Number (the SSN equivalent) also has 9 digits. The best way to cover yourself is with a Non-Foreign Affidavit from the Seller. However, if you have knowledge that the Seller is foreign, you can still be exposed.

What are my responsibilities to identify a foreign Seller?

Similar to a Realtor, if you know or suspect that the Seller is foreign and don’t bring that to the attention of the Buyer, then you may be partially responsible for the FIRPTA tax that should have been withheld. Your responsibility is generally limited to the amount of commission that you earned on the sale – but that is not a risk we would recommend!

The Seller wants to reduce the FIRPTA withholding, what is my role?

There are many ways for the Seller to reduce FIRPTA withholding from the 15% starting point. We are always available to provide guidance on what options will best suit each transaction. If you don’t have the resources available, then we are always happy to provide the appropriate forms for the Seller or discuss the next best option.

What is my role when FIRPTA does apply?

Each Closing Agent will have procedures that they are familiar with and feel comfortable handling. Our job is to provide guidance and tools to help close the transaction on time. Practically, our job is to answer any questions and to complete any IRS FIRPTA related forms. We are chameleons! We work closely with each Closing Agent to ensure that all bases are covered and will hold your hand from start to finish.

Any final words of advice?

Timing is everything! FIRPTA withholding tax is required to be submitted to the IRS within 20 days of the Transfer or within 20 days of receiving approval of a Withholding Certificate. The Buyer can be subject to interest and penalties if the FIRPTA funds are not remitted on time – and they will look to you if there is a mishap. Always be proactive to avoid an uncomfortable conversation and let us help you to ensure that all the right precautions are taken.

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We are responsive, resourceful and will always take the time to explain our recommendations. Our goal is to be your trusted advisor!