Form 8288-B: How Non-Residents Can Request a FIRPTA Withholding Reduction When Selling U.S. Real Estate

Selling real estate in the US can be a complex affair for non-residents, particularly when it comes to FIRPTA withholding. This American tax law can result in withholding up to 15% of the total sale amount, a substantial sum. This is where the Internal Revenue Service (IRS) Form 8288-B comes into play, offering a possibility to reduce this withholding. This article will focus primarily on the significance and utilization of Form 8288-B to request a reduction in FIRPTA withholding.

The Purpose of Form 8288-B

Form 8288-B, officially titled “Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests,” was designed to assist non-residents who are selling real estate in the US to reduce or even eliminate FIRPTA withholding. By filling out and submitting this form to the IRS, it’s possible to reduce the withholding from 15% to 10%, or even completely eliminate it, which can represent a substantial saving.

How to Use Form 8288-B

To benefit from the reduction in FIRPTA withholding, the non-resident seller must fill out Form 8288-B and submit it to the IRS. It’s important to note that this form must be submitted within 20 days of the closing of the sale. The form should state the amount of FIRPTA withholding being contested and should be accompanied by a detailed explanation of why the reduced or null amount is more appropriate.

Deadlines Associated with Form 8288-B

Once Form 8288-B is submitted to the IRS, the agency has 90 days to review the request and issue a withholding certificate. During this time, the buyer must hold the full amount of the FIRPTA withholding in an escrow account. Once the IRS has issued the withholding certificate, the reduced (or null) amount can be paid to the IRS, and the remaining funds can be released from escrow.

Additional Considerations

It’s crucial to understand that submitting Form 8288-B does not necessarily guarantee a reduction in FIRPTA withholding. The IRS will review each request on a case-by-case basis and determine whether the reduction or exemption is warranted. Therefore, it is highly recommended to consult with a tax professional before submitting this form.

In conclusion, while FIRPTA withholding may seem like a major obstacle for non-residents selling real estate in the US, Form 8288-B provides an opportunity to reduce or even eliminate this withholding. However, it’s important to fully understand the process and deadlines associated with this form to maximize chances of success. As always, feel free to consult with a tax professional for personalized advice and to ensure compliance with tax obligations.


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