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This is a common, and understandable, question and there are two documents that require it. The first is FIRPTA and the second is the 1099-s Form. This week, we will only focus on FIRPTA… So what is “FIRPTA”?
All closings regarding real property in the United States must comply with the laws under the Foreign Investment in Real Property Tax Act of 1980, 26 U.S.C. § 1445 (“FIRPTA”). The FIRPTA statute require all closing agents, title companies or attorneys, to withhold 15% of the net proceeds of any transactions that include real property for the purposes of paying any outstanding property taxes.
This statute was created and intended to protect against non-resident foreign, alien, sellers who do not pay the property taxes on their sold property, then transfer the property sale proceeds out of country, leaving the buyer, or potentially the closing agent, with a tax bill that they are not responsible for.
However, FIRPTA does provide exceptions to their withholding requirement.The simplest, and most applicable one, is for the sellers to (1) sign an affidavit, (2) containing the sellers’ Social Security Numbers, (3)stating that the sellers are not subject to FIRPTA, and that the (4) sellers are US citizens for the purposes of the transaction. If you can do this, we do not need to withhold and proceeds from the transaction and why we request your social security number.
What if I’m not a US citizen? FIRPTA withholding does not necessarily apply to all non US citizens. If you have a green card or pass the Substantial Presence Test, as defined by the statute you will qualify for an exemption from FIRPTA. The Substantial Presence Test has a variation of qualifications, but in general, if you have been in the US for 183 days over a 3 year period, and at least 31 of those days are from the current calendar year, you qualify as a US resident for tax purposes.
If you have any questions. visit the IRS website explaining FIRPTA: https://www.irs.gov/individuals/international-taxpayers/firpta-withholding or feel free to send us an email at email@example.com, check out our website @ http://www.timesharetitlepro.com, or call our office at (904) 342-2370 for more information!