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]

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

[santiagocampo]

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?

[DoninGA]

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?

[pk]

@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 ?

[santiagocampo89]

@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!

[rnalves]

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

[Cynthiad66]

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

[pk]

@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

pk 

[rnalves]

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. 

[pk]

@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

pk

[rnalves]

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.

[pk]

@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 ?

[rnalves]

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

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

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)

[DaveF1006]

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 "