Protect Yourself from IRS Penalties When Purchasing U.S. Real Estate from a Foreign Seller
When buying U.S. real estate, most buyers focus on price, inspections, and closing timelines. But if the seller is a foreign person, buyers have an additional responsibility: FIRPTA withholding.
At Cao & Associates, CPA, we regularly assist real estate buyers, agents, and escrow officers in understanding and complying with FIRPTA to avoid IRS penalties. Here’s what every buyer should know.
📘 What Is FIRPTA?
FIRPTA stands for the Foreign Investment in Real Property Tax Act. Under FIRPTA, if a foreign person sells U.S. real estate, the buyer is required to withhold up to 15% of the sale price and remit it to the IRS.
Yes, the buyer—not the seller—is responsible for ensuring FIRPTA withholding is handled correctly.
❓ When Does FIRPTA Apply?
FIRPTA withholding is required when:
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The seller is a foreign individual, entity, or corporation
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The transaction involves U.S. real property, including land, rental homes, or commercial buildings
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No exemption or IRS withholding certificate has been granted
💸 What Are Buyers Required to Do?
If FIRPTA applies, buyers must:
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Determine the seller's status (U.S. or foreign)
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Withhold 15% of the gross sales price at closing
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File Form 8288 and Form 8288-A with the IRS within 20 days of closing
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Send the withholding payment to the IRS along with the forms
Buyers who fail to comply can be held personally liable for the full withholding amount, plus interest and penalties.
🧾 Are There Exemptions?
Yes—buyers may be exempt from FIRPTA withholding if:
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The sales price is under $300,000
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The buyer intends to use the property as a residence
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The seller provides a withholding certificate from the IRS before closing
However, exemptions must be clearly documented and verified. Don’t assume FIRPTA doesn’t apply—consult a CPA.
🧠 How We Can Help
At Cao & Associates, CPA, we help buyers:
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Determine seller status and FIRPTA applicability
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Prepare and file IRS Forms 8288 & 8288-A accurately and on time
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Avoid costly penalties by ensuring full compliance
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Understand exceptions and apply for withholding certificates if applicable
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Communicate effectively with escrow and tax professionals
Whether you're a first-time buyer or a seasoned real estate investor, we offer peace of mind and expert guidance through the FIRPTA process.
📞 Contact Us Before You Close
Buying a property from a foreign seller? Don’t wait until closing day to address FIRPTA. We can guide you through the steps and make sure you’re protected.
📧 Email: info@caoandassociates.net
📱 Call or Text: 425-230-7538 / 425-336-8675
🌐 Bilingual Services: English & 中文
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