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]

@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

pk

[joyanyu]

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!

[joyanyu]

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!

[DaveF1006]

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

[pk]

@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 ?

pk

[pk]

@joyanyu  , while generally agreeing 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 ?

pk

[joyanyu]

Thanks a lot for your detailed answer!  @pk  and @DaveF1006 

My spouse and I are both H1B and our last entry on I94 (=entry in US and still stay in US) is Jan 2020, which means we passed substantial presence test for this year, so we are residential aliens not foreigners for tax purpose. We are selling our primary residence due to the relocation for work, but the total sale price will be over $300k.

I already explained those to the title company with all IRS links and our documents, we even hired a CPA to generate the letter to prove we passed the substantial presence test.  The title company is just too arrogant or racism I guess to understand the situation and keep insisting on withhold the FIRPTA, and threat us that the buyer will sue us if we do not agree with withholding. 

I consulted my previous CPA, they have never dealed with this type of issue before, so they are not sure if we get mistakenly withhold, how can we get it back with next year's tax return.

So I was wondering if you know (in the worst case), if we get withhold FIRPTA (which should not), can we just file 1040 to get it back, or do you know is there any special form I should file?

Thanks again!!

[pk]

@joyanyu . FIRPTA withholding is just like any other withholding by the IRS to assure that they get their due bite.   If you have had a chance to go through the IRC 1445  details you will see that on receipt of the funds ( FIRPTA withholding ), IRS will issue you a cert  showing the receipt of the withholding.  When you file your current year return, you include this amount as paid in / withheld, thus reducing your final tax due ( or increasing your refund  as the case may be ).  What @DaveF1006  was alluding to was an early refund of the amounts so withheld -- I do not believe that will work here.  So you can pay the amount and reconcile  these  when you file your return  next year ( for 2021).

California has a similar policy for property sales in CA irrespective  whom you are -- but their bite is a lot smaller .

BTW -- if you and your spouse  have owned the property for at least two years  and have used it as your main residence for at least a total of 730 days   (and a few other and & buts), you should be able to exclude most of the gain from taxation by the Feds.

Is there more I can do for you ?

Namaste ji

pk

[joyanyu]

I see.

Thanks @pk !

[bigfish1106]

If filing with Tax return, will turbotax expert help on the FIRPTA refund?

[DianeW777]

Yes. If you mail your tax return you can include the Form 8288-B with your return as proof of Foreign Investment in Real Property Tax Act (FIRPTA) tax withholding. Include the amount in your tax return by using the steps below. This cannot be e-filed because you must attach your Form 8288-B.

1. Sign into your TurboTax account > once inside the return select Deductions and Credits at the top
2. Scroll to Estimate and Other Taxes Paid > Show More > Start/Revisit beside Income Taxes Paid > Scroll to Other Income Taxes Paid in 2021
3. Continue to Start Withholding not already entered on a W-2 or 1099

This will allow both federal and state additional withholding not entered in any other location.

For Future Use:

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 
• IRS Form 843 instructions

IRS Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests 

@bigfish1106 

[Edited: 04/01/2022 | 7:54a PST]

[frahman]

Hello Sir,

I see that you are helping fellow users here, that is very cool !!!

I just have a super quick and similar question

so basically I am waiting for IRS to send back the stamped copy of 8288-A. Do you know how long they usually mail this?

Closing date was January 20th 2023, but I havent received the stamped copy of my 8288-A until now and got a bit anxious, Thanks and I look forward for your reply sir