The Internal Revenue Service (IRS) has several rules that Taxpayers must follow whenever anyone (citizen, non citizen, permanent resident) buys real property in the U.S. from a seller who is not a U.S. citizen or permanent resident or a foreign corporation or foreign LLC.

It is the buyer's responsibility to comply with the IRS tax code when buying real property in the U.S. from a foreigner. If The buyer fails to follow the Foreign Investment in Real Property Tax Act of 1980 the buyer could be in serious trouble with the IRS. The buyer must comply with the Foreign Investment in Real Property Tax Act of 1980 commonly known as FIRPTA. FIRPTA requires the buyer to withhold a percentage (15% is the most common amount if the amount realized by the seller is less than of the sales proceeds for the seller and remit the withheld funds to the IRS.

The main purpose of FIRPTA is to prevent foreigners from potentially avoiding paying tax on the gain from the sale of real property by not filing a tax return. By requiring the buyer to withhold proceeds from the sale of real property property, the foreign seller will have to file a tax return in order to receive any of the sales proceeds withheld at closing.

If you are in the process of buying real property from a foreigner and need assistance complying with Foreign Investment in Real Property Tax Act of 1980 feel free to contact our  office. We can assist you regardless of where the transaction takes place in the U.S.

Our fee for preparing the documents needed is $525.00.  (321) 951-0036, or leave a message below.

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Melbourne, FL CPA