FIRPTA Withholding: A Foreign Person Sells a U.S. Real Property Interest - USRPI

Learning Objectives

• Understand when FIRPTA applies to gross proceeds from a transaction.
• Know when and how to use Forms 8288 (A) Form 8288 – Withholding Tax Return (B) Form 8288-A – Statement of Withholding (C) Form 8288-B – Application for a Withholding Certificate
• Form 8288-A – Statement of Withholding
• Form 8288-B – Application for a Withholding Certificate
• Understand the possible role of Form 8288-B in limiting over-withholding and improving the taxpayer experience
• Know the exceptions to the General Rule that 15% of gross proceeds are withheld at settlement
• Know how a simple USRPI transfer by an individual is reported
• See how Forms 8288 and 8288-B interact when other withholding rates are appropriate, particularly for entities and in Part II of Form 8288
• Know where to find detailed guidance on complex situations
• Know how to handle an ITIN application

Course Description

People who buy or sell a U.S. Real Property Interest (USRPI) may be considered foreign, not a U.S. individual or entity. They may be based outside the U.S. They may not usually file a U.S. income tax return.

When FIRPTA, IRC 897, was enacted in 1980, proceeds received by a foreign transferor/seller were designated as Effectively Connected Income, ECI, and subject to payment of U.S. income tax. However, there was no mechanism to ensure compliance with U.S. tax law. 

Gradually, tax code provisions were added to encourage and enforce compliance:

IRC 1445 in 1985 made the transferee/buyer responsible for collecting and remitting the withholding tax at settlement.

IRC 1446 addressed withholding on a foreign partner’s share of ECI

In 2003, an amendment specified that TINs for foreign persons must be entered on the forms. The enhancements continue. Some procedures became effective in 2021, another will become effective in 2023. Others are still in draft, and not yet final or not yet in effect.

This Tax webinar gives an overview of the current rules and forms associated with FIRPTA: Forms 8288, Withholding Tax Return; 8288-A, Statement of Withholding; 8288-B, Application for a Withholding Certificate.

It also guides obtaining an ITIN for use on these forms for foreign persons who do not have a U.S. TIN.

Overview

• FIRPTA: IRC 897, Enforced by IRC 1445, 1446

  3 mins
• Tax: Foreign passport - Foreign person

  19 mins
• form 8288 - Lines 5a, 5b, 5c Entries

  31 mins
• Who submits form 8288-B?

  43 mins
• Early refund

  55 mins
• Is form 8288 complicated?

  67 mins
• IRS website articles

  76 mins