FIRPTA Reporting and Paying Tax on U.S. Real Property Interests
The two forms that are generally utilized in reporting and paying FIRPTA reporting tax to the IRS are:
- Form 8288 — U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests; and
- Form 8288-A — Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property interests.
Transferees must use Forms 8288 and 8288-A on any FIRPTA report and pay any tax withheld on the acquisition of U.S. real property interests. Corporations, partnerships, estates, and trusts that are required to withhold tax on distributions, and any other transactions involving U.S. real property interests, must also use these forms. Both the transferor and transferee’s U.S. Taxpayer Identification Number (TIN) must be included on the forms.
For publicly traded trusts and real estate investment trusts, transferees must use Forms 1042 and 1042-S for reporting and paying over tax withheld on distributions from dispositions of U.S. real property interests.
The tax withheld on the acquisition of a U.S. real property interest from a foreign person is reported and paid to the IRS using a Form 8288. Form 8288 also serves as the transmittal form for copies A and B of Form 8288-A (Statement of Withholding on Dispositions by Foreign Persons of the U.S. Real Property Interests). Generally, transferees must file Form 8288 by the 20th day after the date of transfer of the real property interest.
If an application for a withholding certificate is submitted to the IRS using Form 8288-B either prior to or on the date of transfer, and the application is still pending with the IRS on the date of transfer, the correct withhold tax must be withheld, but does not have to be reported and paid immediately. The amount withheld (or the lesser amount as determined by the IRS) must be reported and paid within 20 days following the day on which a copy of the withholding certificate or notice of denial is mailed by the IRS.
If the principal purpose of FIRPTA reporting is to apply for a withholding certificate and to delay paying over the withheld tax to the IRS, the transferee will be subject to interest an penalties. The interest and penalties will be assigned beginning on the 21st day after the date of transfer and ending on the day the payment is made.
The withholding agent must prepare a Form 8288-A for each person from whom tax has been withheld. Both copies A and B of form 8288-A must be attached to Form 8288 when filed. The transferee retains Copy C for their own records.
The IRS will then stamp Copy B and send it to the transferor subject to withholding. The transferor must subsequently file a U.S. income tax return and attach the stamped Copy B of Form 8288-A to receive credit for any tax withheld.
A stamped copy of Form 8288-A will not be provided to the transferor if the transferor’s TIN is missing from the form. Should this issue arise, the transferor must attach to its U.S. income tax return substantial evidence of withholding, such as closing documents, and a statement that contains all the required information shown on Forms 8288 and 8288-A, including the transferor’s TIN
Application for Reduced Rate of Withholding
A reduced rate of withholding may be allowed upon the submission and acceptance of Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests.
Form 1099-S, Proceeds from Real Estate Transactions
Generally, a real estate broker or other person responsible for closing the transaction must report the sale of the property to the IRS using Form 1099-S.
To download any of the IRS forms mentioned above, click on the hyperlinks below:
- Form 8288
- Form 8288-A
- Form 8288-B
- Form 1099-S