Policy Title:
The Foreign Investment in Property Tax Act (FIRPTA)
Policy Type:
Closing and Escrow
Updated:
3/19/2024
Effective Date:
02/21/2024
Policy
Blue Brick Title will execute the closing according to the IRS rules, however the amount
withheld at the time of closing will be released to the IRS Immediately unless the seller
furnishes Blue Brick Title and the buyer withholding certification prior to closing.
Procedure
(This file has live hyperlinks for more information.)
In the documents Section of Qualia, it will now contain a document “Foreign Seller Certificate
and Hold Harmless” must be presented and processed during the closing. The reason for this
document is to protect the property buyer and Blue Brick Title from liability for the IRS
withholding tax which applies if the seller is a foreign person. The Document is located in all
FIRPTA Folders as well as the Seller Documents Folder.
Quick reference to when to withhold.
If the buyer
intent to
use the
property as
residence
Yes
Yes
Property
Value
FIRPTA
Withhold
Forms need at closing
IRS Forms
$300,000 or
less
$300,000 and
up to
$1,000,000
Exempt

None
10%


Yes
$1,000,000
and over
15%


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Foreign Seller Certificate
and Hold Harmless
Notice of FIRPTA
Withholding Requirements
10%
Waiver of Settlement
Agent Responsibility
Notice of FIRPTA
Withholding Requirements
15%
Waiver of Settlement
Agent Responsibility


8288 Form
8288 A Form copy A,
B and C


8288 Form
8288 A Form copy A,
B and C
No
No value
requirement
15%


Notice of FIRPTA
Withholding Requirements
15%
Waiver of Settlement
Agent Responsibility


8288 Form
8288 A Form copy A,
B and C
1. If the Seller is a US Citizen or a US Resident then FIRPTA does not apply.
2. Seller must provide a TIN number. Withholding still applies and forms must be submitted
without a TIN. IRS will send the appropriate document to seller.
3. If the Seller is not a US Citizen or a US Resident then the Buyer may have to withhold 10% or
15% of the sale price at the closing. The buyer is held liable for the tax if it is not paid by
the foreign seller.
4. If the Seller is not a citizen or resident then the next question is:
Does the Buyer have definite plans to use the property as his residence (definite plans to
reside at the property for at least 50% of the number of days the property is used by any
person during each of the first two 12-month periods following the date of transfer. When
counting the number of days the property is used, do not count the days the property will
be vacant) AND the sale price does not exceed $300,000? If you can answer yes to both of
these questions then the transaction is exempt from withholding.
5. If the sales price is more than $300,000 and under $1,000,000 The buyer is required to
withhold 10% of the sales price. Withholding on the full sales price is required even if the
transaction is one in which an installment sale is being done.
6. It is the buyer, not the seller, who is obligated for withholding and reporting required
by FIRPTA at the time of the sale. Unless the transaction is exempt from withholding, the
buyer must report the sale to the I.R.S. on Forms 8288 and 8288-A, and pay the required tax
withholding, by the 20th day after the date of transfer. The “date of transfer” is the first
date consideration is paid or a liability transferred (excluding payments before title passage
such as earnest money and deposits). This deadline is extended to the 20th day after the
I.R.S. accepts or denies a legitimate application for a “withholding certificate” if the
application is filed on or before the transfer date. In order to complete the appropriate
reporting forms or apply for a withholding certificate the foreign person must have a tax
identification number (ITIN). To apply for an ITIN the foreign person must file form W7 with
the IRS.
7. Prior to a transfer, the seller may apply for a IRS withholding certification to reduce or
eliminate the required amount of the withholding. The IRS is required to act on a request
for a withholding certificate within 90 days of receipt of the application. Once the
withholding certificate is granted then the escrow may release the amount withheld in escrow
at closing to the Seller.
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8. If, prior to closing date or the day of closing, an application (form 8288b) for a withholding
certificate is or has been submitted to the IRS, the money can be placed in escrow until a
notice from the IRS is received. A seller that applies for a withholding certificate must notify
the buyer in writing that the certificate has been applied for on the day of or prior to closing
date. The IRS will normally act on an application within 90 days of receipt of all information
necessary to make a proper documentation. The IRS will determine whether withholding
should be reduced or eliminated or whether a withholding certificate should not be issued.
9. If the withholding certificate is denied then withholding amount must be tendered to the
IRS within 20 days of the issuance of the denial of the application.
10. Joint transferors. If one or more foreign persons and one or more U.S. persons jointly
transfer a U.S. real property interest, you must determine the amount subject to
withholding in the following manner. Allocate the amount realized from the transfer
among the transferors based on their capital contribution to the property. For this
purpose, a husband and wife are treated as having contributed 50% each.
a. Withhold on the total amount allocated to foreign transferors.
b. Credit the amount withheld among the foreign transferors as they mutually agree.
The transferors must request that the withholding be credited as agreed upon by
the 10th day after the date of transfer. If no agreement is reached, credit the
withholding by evenly dividing it among the foreign transferors.
11. If prior to closing date or the day of closing, an application (8288B) for a withholding
certificate is or has been submitted to the IRS, the money can be placed in escrow until a
notice from the IRS is received. A seller that applies for a withholding certificate must notify
the buyer in writing that the certificate has been applied for on the day of or prior to closing
date. The IRS will normally act on an application within 90 days of receipt all information
necessary to make a proper determination. The IRS will determine whether withholding
should be reduced or eliminated or whether a withholding certificate should not be issued.
When To File
12. Withholding agent (always the Buyer) must file Form 8288 along with Forms 8288­A and transmit
the tax withheld to the IRS by the 20th day after the date of transfer. Blue Brick policy is to file and
send the amount withheld as soon as the file is disbursed
13. Complete Form 8288 must also complete a Form 8288­A for each person subject to withholding.
Copies A and B of Form 8288­A must be attached to Form 8288. Copy C is for our records. Multiple
Forms 8288­A related to a transaction can be filed with one Form 8288. Don’t confuse form 8288-B
with 8288-A copies a, b and c. 8288-B is what the seller files to get exemption.
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14. The IRS will stamp Copy B of each Form 8288­A and will forward the stamped copy to the foreign
person subject to withholding at the address shown on Form 8288­A. To receive credit for the
withheld amount, the transferor generally must attach the stamped Copy B of Form 8288­A to a U.S.
income tax return (for example, Form 1040NR, U.S. Nonresident Alien Income Tax Return, or 1120­F,
U.S. Income Tax Return of a Foreign Corporation) or application for early refund filed with the IRS.
15. You must withhold even if an application for a withholding certificate is or has been submitted to
the IRS on the date of transfer. However, you do not have to file Form 8288 and transmit the
withholding until the 20th day after the day the IRS mails you a copy of the withholding certificate or
notice of denial. But if the principal purpose for filing the application for a withholding certificate
was to delay paying the IRS the amount withheld, interest and penalties will apply to the period
beginning on the 21st day after the date of transfer and ending on the day full payment is made.
16. Seller’s TIN missing. If you do not have the SELLER’s taxpayer identification number
(TIN), you still must file Forms 8288 and 8288­A. A stamped copy of Form 8288­A will not
be provided to the transferor if the transferor’s TIN is not included on that form. The IRS
will send a letter to the seller requesting the TIN and providing instructions for how to
get a TIN. When the seller provides the IRS with a TIN, the IRS will provide the seller with a
stamped Copy B of Form 8288­A.
Where To File
Send Form 8288 with the amount withheld, and copies A and B of Form(s) 8288­A to:
Ogden Service Center
P.O. Box 409101 Ogden, UT 84409.
For a full list of exemptions: Full List of Exceptions
Internal Revenue Service – FIRPTA WITHHOLDING
Internal Revenue Service –Reporting and Paying Tax on U.S. Real Property Interests
Internal Revenue Service – Withholding Certificates
Internal Revenue Service –Definitions Unique to FIRPTA
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