FIRPTA TAX WITHHOLDING ON SALE OF YOUR USA BASED PROPERTY – RECLAIM YOUR 10 OR 15% TAX WITHHELD ON THS SALE PROCEEDS
What is FIRPTA?
When any foreign person sells is USA-based property, they are subject to the FIRPTA TAX withholding as per the (Foreign Investment in Real Property Tax Act) at the rate of 10% or 15% of the Gross Proceeds by the US Escrow/Selling agent. For example: Sale price of the US property sale value is $100,000x15% = $15,000.
What if the US Escrow agent/attorney assisting with the sale has withheld tax and remitted to US tax revenue authorities, Can I claim the FIRPTA tax withholding from IRS via refund claim?
"The Good news is YES, YOU CAN apply for reclaim within four years of sale by applying for ITIN and filing US Nonresident Alien Tax filing."
In this scenario, you have two options.
OPTION – 1 (If the sale happened in the current year, for example, 2022)
Then start with the ITIN application process with a passport certified by IRS-approved agents who can assist with all the relevant paperwork checks and supporting documents preview. With this option, you get the ITIN number in 6 to 8 weeks first, and then later next year in 2023, when IRS releases 2022 US tax forms, The seller can file the US Nonresident tax return 1040NR along with Form 8288A. However, under this route, the refund claim process could take around 18 months from the date of sale.
OPTION – 2 (If the sale happened in the prior year, for example, 2022 [i.e on or before 31st December 2021)
Then it's highly recommended to submit an ITIN application along with a 1040NR US tax return and 8288A withholding process. This way, you save time on the ITIN application and tax refund processing time. The FIRPTA tax reclaims refund processing time between 6 to 9 months.
Below Video Link Explains the FIRPTA Process for your easy reference.
If you have sold your USA property and need assistance in completing form Form W-7 for an ITIN application or to reclaim the FIRPTA tax. Our team can assist. We are one of the IRS-approved Certified Acceptance Agents (CAA) with many years of experience dealing with ITIN office and FIRPTA work.
Please visit our website for FAQ related to ITIN and US Tax Assistance.
We are one of the IRS Enrolled Agents with many years of experience in US 1040/1040NR personal tax compliance reporting and Fatca Compliance FBAR Reporting, We are happy to assist our clients in a timely, efficient, and cost-effective way.