Before Closing
Review the transaction facts, expected withholding, documentation, and whether a withholding-certificate request should be considered.
Why money may be withheld at closing
When the FIRPTA rules apply, the buyer is commonly responsible for withholding and sending an amount to the IRS. That withholding can reduce the seller’s cash at closing, but it is not necessarily the seller’s final U.S. tax.
The property sale and available withholding credit may still need to be reported on a U.S. income tax return. In qualifying circumstances, a withholding-certificate request may be considered before closing to seek an adjusted withholding amount.
How we may help
- Review the seller, buyer, property, and transaction timeline.
- Estimate the potential U.S. tax and evaluate whether a withholding-certificate request may be appropriate.
- Prepare Form 8288-B and supporting schedules within the agreed scope.
- Coordinate relevant information with the buyer, withholding agent, or closing professionals.
- Consider taxpayer-identification needs and related process questions.
- Prepare agreed post-closing reporting and claim available withholding credit.
Where Forms 8288, 8288-A, and 8288-B fit
The buyer or other withholding agent generally uses Form 8288 to report and pay FIRPTA withholding and Form 8288-A to report the withholding attributable to the foreign seller. A seller or buyer may use Form 8288-B to request an IRS withholding certificate in qualifying circumstances.
A withholding certificate can potentially adjust the amount withheld, but it does not eliminate the need to analyze the seller’s actual gain, tax liability, eligibility, timing, and supporting documentation.
A closing date matters.
If a purchase contract has been signed or a closing date is approaching, mention the date when you contact us so timing can be evaluated promptly.
Common questions
Why is money being withheld from my sale proceeds?
When FIRPTA applies, the buyer is commonly required to withhold and send an amount to the IRS. The rules, possible exceptions, and amount should be reviewed for the actual seller and transaction.
Is the amount withheld my final U.S. tax?
Not necessarily. Withholding is a payment toward a potential tax liability, not a final calculation of the tax on the sale. The transaction and available credit may still need to be reported on the seller’s U.S. income tax return.
What is Form 8288-B used for?
Form 8288-B is an application for a withholding certificate that may reduce or eliminate withholding when the applicable requirements are met. Approval and timing are controlled by the IRS.
Who prepares Forms 8288 and 8288-A?
The buyer or withholding agent generally reports and pays withheld tax using Form 8288 and provides the relevant Form 8288-A information. The exact responsibilities and our role should be confirmed for the transaction.
When should I contact you?
Preferably as early as possible after the transaction terms and expected closing date are known. Do not wait until closing to raise a potential withholding-certificate request.
General reference: IRS FIRPTA Withholding and IRS Reporting and Paying Tax on U.S. Real Property Interests.