FIRPTA Forms 8288, 8288-A, 8288-B: Withholdings & Exemption
These forms must be completed and submitted to the IRS by the buyers, or the buyers’ withholding agent, to report all withholding tax on sales of U.S. property by Canadians.
All sales subject to FIRPTA require the use of Forms 8288 and 8288-A. If however, you are eligible for an exemption or reduction of the statutory withholding amount of 15%, and are applying for a withholding certificate, the buyers must also complete Form 8288-B.
FIRPTA Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests
Form 8288 is prepared and filed with the IRS by the buyers, or the buyers’ withholding agent. It is used to report the taxes withheld on the purchase of the property from foreign persons, in our case—Canadians. The FIRPTA withholding must be remitted to the IRS no later than 20 days after the closing of the sale.
FIRPTA Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests
Form 8288-A is required to be prepared by the buyers, or the buyers’ withholding agent. A separate form must be prepared for each seller that has had tax withheld from the proceeds of the sale.
This form contains three copies. Copies A and B are submitted along with Form 8288, while copy C is retained by the buyers.
Applying the Withholding Tax
1 You Already have a Valid ITIN (Individual Taxpayer Identification Number)
The IRS does the following:
- Applies the withholding tax to your existing ITIN.
- Issues, and sends you, a final tax slip. This slip is a stamped copy of Form 8288-A, and contains a control number across the top and is used to file your US taxes.
You must then file your U.S. tax return and attach this stamped copy. The tax return will determine and settle any amount owed by you or refundable to you.
2 You Do Not have a Valid ITIN
- An application for an ITIN number can take up to 12 weeks. Without an ITIN, the IRS cannot apply the withholding tax to your account. To minimize the delay, you should apply as soon as possible after the closing of the sale.
In the absence of an ITIN, you will receive a letter from the IRS informing you that they cannot issue your final tax slip until you have an ITIN. Once you provide your ITIN, the IRS will be able to apply the withholding tax and issue the final tax slip. At that time, you will be able to file your U.S. tax return.
FIRPTA Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests
If you qualify for an exemption or reduction of the prescribed 15% withholding tax on the proceeds of your sale, you can apply for the exemption or reduction by preparing and submitting Form 8288-B.
If you are applying for an exemption, this form is all that is required by the IRS. However, if you are applying for a reduction, you must include a calculation of the expected capital gains tax. You will also need to provide the IRS documentation that the withholding amount will exceed the amount of your maximum taxes owing.
The application for a withholding certificate should be prepared and submitted prior to the closing of the sale. This will authorize the escrow agent to hold the withholding amount in escrow until the application is processed by the IRS. This process will take a minimum of 90 days.
FIRPTA Withholding Refund
Upon approval of your application, and the final amount of taxes is determined, the amount requested is remitted to the IRS by the escrow agent in addition to submitting Forms 8288 and 8288-A The balance remaining will then be released to you.
You should complete your application, along with the above documentation (if you are applying for a reduction). Alternatively, the application may be completed by us or by the buyers or agent.
Forms, Forms, & More Forms: Sounds Like Fun, Eh?
It sure isn’t fun when you’re trying to do something you’re not experienced at doing.
Let FIRPTA CANADA INC. do all the dirty work so you can relax. We’ve helped many Canadians just like you, and we’ll do the same for you. We love filling out forms as much as beavers love chewing on trees.
We’re industrious and work at great length on your project file until it’s successfully completed. We will:
- File all required forms relating to FIRPTA.
- Provide your title or escrow company with all required FIRPTA documentation.
After the closing of your sale, we will do the following:
- Assist you in obtaining an ITIN (Individual Taxpayer Identification Number) for each of the owners of the property.
- File the U.S. federal and state tax returns, and Canadian tax returns for each seller.
As an IRS Certified Acceptance Agent, we’ve helped many people just like you obtain an ITIN number so they can achieve their goals.
Get Started Today
Contact us to start the process and we’ll get back to you within two business days, unless it is tax season as we may take a bit longer.
To make it as easy as possible for you, we can work with you in person or virtually.