topic FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax? in Deductions & credits

FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

santiagocampo89 — Mon, 04 Jan 2021 21:38:51 GMT

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

DoninGA — Mon, 04 Jan 2021 21:44:36 GMT

You can file a Form 843 (Claim for Refund), together with a Form 8288-B, to show the estimated tax on the sale. This is the IRS's official process for obtaining an early refund of FIRPTA withholding.

TurboTax does not support Form 843 or Form 8288-B

IRS Form 843, Claim for Refund and Request for Abatement - https://www.irs.gov/pub/irs-pdf/f843.pdf

IRS Form 843 instructions - https://www.irs.gov/pub/irs-pdf/i843.pdf

IRS Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests - https://www.irs.gov/pub/irs-pdf/f8288b.pdf

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

santiagocampo — Mon, 04 Jan 2021 22:08:37 GMT

Hello @DoninGA, Thanks for the reply.

Background: When selling the home we filed forms 8288 and 8288-A, along with mailing the FIRPTA withholding check to the IRS.

Follow up:
Your message states this would be for an Early Refund.

From online advice I had read of three ways to get your money back:

Option 1

File an application to reduce or even eliminate the withholding.

Option 2

File a request for early refund of the FIRPTA withholding.

Option 3

Accept the automatic withholding and wait until the following February/March and file a US tax return to claim a refund.

In this case we are looking at option number 3 in which the IRS already withheld FIRPTA. And we are looking to get it back along with filing our return during tax season. Is the process the same as you described already in your previous post?

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

DoninGA — Mon, 04 Jan 2021 22:33:37 GMT

This is outside my expertise and doubtful anyone else on this forum would be able to assist. You should use a local tax professional who is versed in these types of transactions and withholdings.

However, there may be one user who has some knowledge. @pk Are you familiar with FIRPTA and how to get a refund for the taxes withheld?

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

pk — Tue, 05 Jan 2021 20:14:15 GMT

@santiagocampo89 , having gone through the above between you and @DoninGA ,

(a) assuming---> that you are an individual Non-Resident Alien ; that you have been filing 1040-NR in the past recognizing the income from the income/business real-estate; that you have disposed off the asset/property to an US person ( US citizen/Resident ( Green Card ) / Resident for tax purposes; that you have a 1099-S etc.

(b) the FIRPTA is only a means to ensure that US collects (through withholding) and taxes due on the disposition of the asset

(c) the full reconciliation of the tax situation due to the sale of the asset ( and any other incomes for the tax year ) is done on form 1040-NR for the tax year. So you need to file a return ( just as you have earlier years) showing the sale, the gain-loss computation, the taxes withheld under FIRPTA etc. In your particular situation ( if the property was sold during 2020), there is no need to get the early refund--- just fil;e the return as soon as you can and the refund would be issued in due course.

A note ---- since you have been filing 1040-NR, why are at this TurboTax forum -- I ask because TurboTax does not support form 1040-NR. If you are not currently in USA, suggest using a local tax professional familiar with form 1040-NR and all its complications./ implications. You can also download the form 1040-NR and its instructions and prepare the return by yourself ( it is somewhat complicated though). TurboTax partner SprinTax offers preparation of form 1040-NR. If you have been filing form 1040 ( through TurboTax ) while being a Non-Resident Alien, you may have to file amended return(s) to correct the error(s). Which country are you form and were you in USA earlier ( and perhaps used the real-estate as your main home ) ? There may be reduction in FIRPTA taxes in such a case.

Is there more we can o for you ?

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

santiagocampo89 — Tue, 05 Jan 2021 21:47:06 GMT

@pk
PK thanks for the valuable feedback.
This is for my dad who is a NR, and you are right we erroneously filed 1040 for him via Turbotax in the past couple of years. He was living and working in the US since 2014 and used the home as a primary residence, when he moved out of the country in 2017 (Canada) it became a rental property. Thanks so much for the feedback the best for him seems to reach out to Sprintax or another expert to file this year to get this matter resolved.

[I personally use Turbotax as well, but reside in the US hence how we got to the forum]

Thanks!

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

rnalves — Thu, 08 Apr 2021 02:23:22 GMT

Hello everyone,

Hope I´m still able to get a reply! @pk @DoninGA

I have a common situtation that I need some assitance. I am currently filling mine and my wife´s taxes through Turbo Taxes as I have for the past few years!

On February of last year (2020) I ended my employment with a company in the US and moved to Brazil where I reside. That´s where I am from but lived in the US for 11 years.

On March of this year (2021), we have sold our house in the US. Since I been living in the Brazil since last year, it was required for me to file Form 8821 & 8288-A for FIRPTA.

Now as I do my taxes, I am getting the feeling that maybe I did not have to do that as I have to file my taxes this year as a US resident. Could you please guide me on the best way to proceed and get the money that is being witheld by the IRS.

To also be clear, my work authorization ended on February which I wouldnt be eligible to be in the US legally.

Thank you for your time and assistance

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IR...

Cynthiad66 — Thu, 08 Apr 2021 20:53:10 GMT

File your tax return as normal. The sale of your residence is not a part of your 2020 tax return, since you sold it in 2021. Also, if you have a gain on the sale of residence, the gain is not taxable unless your gain exceeds $500,000.00.. If you are a US citizen all of your income earned is taxable in the US for 2020.

If you are a Brazilian resident, your worldwide income will be subject to personal income tax at a progressive rate that peaks at 27.5%. If you are a non-resident, you are responsible for taxes only on Brazilian income at a rate of 25%, and you are not required to file an income tax return until you become a resident.

You have to file a U.S. income tax return while working and living abroad unless you abandon your green card holder status by filing Form I-407, with the U.S. Citizen & Immigration Service, or you renounce your U.S. citizenship under certain circumstances described in the expatriation tax provisions.

Use this link for more details: Frequently Asked Question for Internationals

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

pk — Fri, 09 Apr 2021 04:59:42 GMT

@rnalves , Having gone through your original post and @Cynthiad66 response, I am still unclear as to you and your spouse are US citizen/ Green Card holder or were working in the USA only on a work visa ( ??). Second are you a BR citizen ( and retained that irrespective of US status) or are in BR on work visa? What papers did you sign when you left for Brazil ( ie..e did you abandon your Green Card or US citizenship or work visa whichever was applicable at the time

Your answers will definitely impact FIRPTA i.e. were you a Non-US person when sold the property.

I will await your response

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

rnalves — Fri, 09 Apr 2021 21:08:02 GMT

Hello everyone,

First, thank you for your time. To answer your question, I never had and still don´t have a green card! While I was in the united states (Until February 18th) I had a work authorization only. Now I live in Brazil and will be in the process of getting the green card, but do not have it yet.

My wife is American, and since I was legally in the US, we filled our taxes jointly and will this year of 2020.

I am a BR citizen and I´m trying to get a visa to travel to the US since my work visa expired but because of Covid I have not yet, the consulates are closed.

No papers were signed, other than me leaving my company. My work visa simply expired and I left.

When we sold the house (MARCH of 2021) this year, I was here in Brazil! And I do not have any legal status to go into the US.

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

pk — Sat, 10 Apr 2021 04:44:54 GMT

@rnalves , mais preguntas -- is your wife ( an American citizen/GreenCard ) on the title of the property that you sold ; which state was the property; what visa did you work with --H-1 or ??

obrigado

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

rnalves — Sat, 10 Apr 2021 17:49:16 GMT

Oi!!!

PK, yes my wife was on the title as well, which is also another thing that is weird because the last thing I want is pay double the taxes.

I am not sure which information they put on the title, I am assuming my OPT card! I have a social security card too which they used.

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

pk — Sun, 11 Apr 2021 18:51:26 GMT

@rnalves so from all you say I get -->

1. you were in the USA on F-1 visa ( yes? ), finished your OPT, have SSN and left the USA during the first quarter of 2020

2.You are married to a US person ( US citizen/Green Card) and have filed jointly for at least 2019. Thus you were treated as a Resident for Tax purposes ( because you passed Substantial Presence Test or because you requested to be treated as such do you can file joint)

3. You jointly owned a property ( did you use it as your main home ? when did you acquire it ? how long did you both of you use it as main home ? ) and sold this in 2020. The title company withheld 15% of the sales price for federal taxes under FIRPTA and probably some amount for State ( what state ? ). You have proof of this withholding shown on HUD-1 ( settlement form ) and/or other documents

4. Now you need to file your federal and State returns for 2020 and need to reconcile the FIRPTA withholding ---- generally this withholding should be entered under "other" taxes withheld/ paid on schedule-3 of the form 1040.

5. Issue here is whether you can indeed file form 1040 or are you forced to file form 1040-NR

Does this cover the situation? Is your spouse with you in BR? Note that if you are willing to request that you be treated as a US person i.e. expose your "no-US sourced " earnings to US taxes, you should be able to file as a joint. I know it is taking a longtime but perhaps you can go through this note and then correct /answer any remaining questions. The idea is to get you qualified to file jointly.

Else, you need to be able to show your spouse as the ONLY owner of the disposed off property and thus subject to US taxes and you become a Non-US person filing a dual status person -- 1040- for the first two months of 2020 and then 1040-NR for the rest of the year covering any US sourced earnings ( such as interest , dividend, etc. etc. ). And in that case your wife files as a US person covering her world income including the sale of the property etc.

Does this make sense ?

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

rnalves — Mon, 12 Apr 2021 12:00:20 GMT

1. you were in the USA on F-1 visa ( yes? ), finished your OPT, have SSN and left the USA during the first quarter of 2020

YES

USED AS MY MAIN HOME FOR ABOUT 3 YEARS IN THE STATE OF COLORADO. I DO HAVE THE ESCROW INSTRUCTIONS AND THE AMOUNT THAT WAS WITHHELD.

My wife is in the US as of now, but she travel´s back and forth. Does the form 1040 is supported by turbo tax or I need to use another company?

The information above is correct but I am still a bit confused on how to move forward, I need to finish my taxes this week because of the due date. I have gone through the process on TurboTax and I am ready to submit filling jointly, just wanted to clarify my FIRPTA situation to understand if I can do anything to get this money back (Or part of it)

Showing my spouse as the ONLY owner of the property might be too late as the house has been sold and all the documents have been filed.

Maybe another question, since the house was sold in March of 2021, do I consider on my returns for 2020? Maybe we are discussiing something that can only be done next year. (BUT if I can do it with my 2020 income, that would be better)

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IR...

DaveF1006 — Tue, 13 Apr 2021 02:15:28 GMT

Please read this Turbo Tax link posted by Champ DoninGA.

"You can file a Form 843 (Claim for Refund), together with a Form 8288-B, to show the estimated tax on the sale. This is the IRS's official process for obtaining an early refund of FIRPTA withholding.

TurboTax does not support Form 843 or Form 8288-B

IRS Form 843, Claim for Refund and Request for Abatement - https://www.irs.gov/pub/irs-pdf/f843.pdf

IRS Form 843 instructions - https://www.irs.gov/pub/irs-pdf/i843.pdf

IRS Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests - https://www.irs.gov/pub/irs-pdf/f8288b.pdf "

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

pk — Tue, 13 Apr 2021 03:11:30 GMT

@rnalves alright -- my mistake , somehow I got the impression that the property was sold in 2020 and needed to be recognized on your return for 2020. So the sale of the property is for the tax year 2021 and filed by April 2022. The answer by @DaveF1006 covers your options if you wanted to have some or all of the amounts held under FIRPTA returned to you early rather than in April of 2022. You can assert that because you and your wife ( a US person ) file jointly and meet the requirements for exclusion of capital gain on main home, ( Two years of ownership by either spouse and Use as main home by both spouse for at least 730 days , with a look back of five years from the date of sale of the property ) that this withheld amounts should be returned at earliest rather than wait for a year.

For 2020 tax year ( current filing ), your filing date is May 17th ( IRS has extended the filing date for all taxpayers because of COVID issues ) and because you are abroad , your joint filing date ( not paying date ) is June 15th without extension and October 15th with extension.

TurboTax supports preparation and filing of forms 1040 and so there is no need for you to go elsewhere.

Note that because you are married to a US person and was a resident for tax purposes, you can still file jointly with her--- just include a note signed by both of you that you would like to treat yourself as a US person for the tax year 2020.

Also because you are married to a US person, there are special visas available to you ( K visa) rather than wait for the Green Card to enter the USA

Hope this closes your query or do you need more on this ?

Chus

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

joyanyu — Tue, 22 Mar 2022 21:53:45 GMT

Hi @DoninGA

We are resident aliens, but the buyer's closing company insists that we need to withhold the FIRPTA.

Do you know if we can file 843+8288B to get the early refund even we are resident aliens not foreigners?

Thanks a lot!

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IRS. How do I request FIRPTA refund through Turbotax?

joyanyu — Tue, 22 Mar 2022 22:03:25 GMT

Hi @pk

I saw your answer is very comhensive, so I would like to see is you could help on the similar issue here.

We are resident aliens, but the buyer's closing company insists that we need to withhold the FIRPTA without checking any evidence we showed. If we get mistakenly withhold the FIRPTA, do you know if we can file 843+8288B to get the early refund back even we are resident aliens not foreigners? Or if we wait for next year's tax return file, is there a way to get our FIRPTA withhold back with 1040 form?

Thanks a lot!

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IR...

DaveF1006 — Tue, 22 Mar 2022 23:28:23 GMT

Yes, you can file a form 843 per following instructions to receive a refund. Here is a link to download the form.

You would file a form 8288-B to Apply for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests so that you won't be burdened in paying the FIRPTA tax again if you decide to broaden your US property interests. Here is a link to download the form.

It is best to fill out these forms and mail these to the IRS or else if you download and print these forms then send in with your return, you will need to print and mail your entire return. This why I suggest to electronically file your return and then send these forms in separately because Turbo Tax does not support neither one of these forms for efiling.

@joyanyu

Re: FIRPTA Refund We sold an investment property in 2020, for which FIRPTA was withheld by the IR...

pk — Wed, 23 Mar 2022 03:50:18 GMT

@joyanyu , while generally with the above suggestions --- I would suggest taking care of the problem at source:

IRS section 1445 requirement for FIRPTA withholding is based on "foreign person". Here is a link to the IRC defining Foreign Person: https://www.irs.gov/individuals/international-taxpayers/foreign-persons.

IRC section 1445 applicable to disposition of US RealEstate Interests is describe the need to withhold FIRPTA tax from the transferror ( one whom disposes ) and if not the Tranferee ( the receiver/buyer of the asset ) is liable . Thus the title company is trying to avoid exposure . But they are wrong if , and only if , both you and your spouse ( I am assuming here that you are selling your home and that you are each a resident-- Green Card or Resident for tax purposes , having met the substantial presnce test, filing form 1040 return for the year in question) are both US PERSONS ( for tax purposes ). Here is a link to IRC 1445 -- it is long and tortuous but covers all kinds of situations -->

https://www.law.cornell.edu/cfr/text/26/1.1445-1

Here is another page from the IRS explaining FIRPTA and covering the area and has FAQ:

https://www.irs.gov/individuals/international-taxpayers/firpta-withholding

BTW , I don't see how you can use form 843 for seeking an early refund of the FIRPTA withholding -- @DaveF1006 's link covers the use of the form but ( unless I missed it ) does not include the use for section 1445 early refund.

I would hope that you can convince the Title company or their lawyer that (a) you are not a "foreign Person " for purposes of IRC 1445 and (b) that you are a resident for tax purposes and hence the FIRPTA does not apply to you or your spouse.

BTW -- what is your visa status -- Green Card , H-1B or what ? How about your Spouse ? What is the real-property you are selling --- your own residence or income property or what ? Is the total prpoceeds more that US$300,000 ?

Is there more (I can do for you ?