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FOREIGN NATIONALS & FIRPTA

Information may not be reliable

9/24/2020

The U. S. Congress passed the Foreign Investment in Real Property Tax Act (FIRPTA) in 1980 to tax foreigner’s profits from the income resulting from the sale of any real estate

If you’re a foreign national and you sell your interest in a property in the United States, the FIRPTA tax subjects you to a 15 percent withholding tax of the value of the property, even if you sold it at a loss. You must deposit the withholding amount with the U.S. Internal Revenue Service (IRS) within 20 days of the sale closing.

The IRS withholds the tax as a deposit until you file your U.S. income tax returns, which must be by the following April 15. If the amount withheld is greater than the tax you owe, they refund the difference to you. If the amount withheld is less than the actual tax, you must pay the balance when you file your return. Like much of the U.S. tax code, this law can be confusing and open to some interpretation.

Their international specialists are available to provide expert assistance to you, so you can take advantage of any possible FIRPTA exceptions or exemptions. It’s worth your while to consult with a tax expert.

A FOREIGN NATIONAL UNDER FIRPTA

FIRPTA considers anyone who is not a U.S. citizen or legal resident to be a foreign individual. The law requires that resident aliens fulfill at least one of three criteria:

You must have lived within the United States as a lawful permanent resident during the year of your sale, and you must have a permanent resident green card to be lawful and permanent.

You must pass a substantial presence test. The IRS uses a rather complex formula to determine whether your stay was substantial. During the year of the sale, you must have resided in the United States for a minimum of 31 days, as well as resided in the country for not less than 183 days over the past three years, inclusive. But while you get full credit for the days during the current year, the IRS only gives you credit for only one-third of the days you were present the year before the sale and one-sixth of the days for the year before that.

You may qualify as a U.S. person if you meet the requirements to make a first-year election. The IRS uses another formula for this, which your tax accountant can explain in full.

If you meet any of these requirements, you are entitled to an exemption of the withholding of the FIRPTA tax. To clarify exceptions visit our Sarasota CPA company.

Working Hours:
Monday - Friday: 9:00 am - 7:00 pm;
Saturday: 9:00 am - 4:00 pm,
Sunday: Closed
Payment: cash, check, credit cards.

Miller & Company CPAs: Tax Accountants
Sarasota, Florida
2831 Ringling Boulevard, #204B
Sarasota, FL 34237
(941) 366-5646