If the IRS considers you a “foreign person” and you are selling real estate your sale may be subject to FIRPTA withholding.
FIRPTA is short for The Foreign Investment In Real Property Tax Act of 1980. FIRPTA is a tax law that imposes income tax on foreign persons when selling real estate. Read more about FIRPTA at the IRS website. https://www.irs.gov/individuals/international-taxpayers/firpta-withholding
This sounds scary and can be confusing to both sellers and buyers. Buyers can be especially frightened by the FIRPTA process because there are forms buyers have to sign that say the buyer is responsible for paying any taxes due if they are not collected at closing.
Many real estate agents do not understand FIRPTA and they do not ask the right questions of their clients when listing a property for sale. Because a FIRPTA sale can be confusing and a buyer is often not told about the requirement until days before closing I have heard of several sales where the buyer cancelled the contract at the last minute.
If your property sale is subject to FIRPTA it is important you hire a real estate broker with experience in navigating this process. We have experience helping clients successfully complete FIRPTA sales. Along with connections with a title company and CPA both with experience in FIRPTA sales we can help make this situation as easy as possible for you.
During our most recent FIRPTA sale the sellers did not have to pay any withholding to the IRS. We were able to explain the procedure to the buyers and arrange for them to agree the money would be held in escrow until a CPA received a decision from the IRS. Shortly after closing the CPA received notice that the sellers did not owe any taxes and the funds were retuned to them.
Kopa Real Estate helps clients in the Austin area including Round Rock, Cedar Park, Leander, Buda, Kyle and Dripping Springs. If you are selling real estate subject to FIRPTA please contact Eric Peterson at 512-791-7473 or eric@koparealestate.com.
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