May 18th, 2023 Posted in Budget, Accounting

Understanding FIRPTA: A Comprehensive Guide to Foreign Real Estate Tax Compliance in the U.S.

As a Certified Public Accountant (CPA), I understand the complexity and importance of tax compliance for both individuals and businesses. One area that requires particular attention is the Foreign Investment in Real Property Tax Act (FIRPTA).

FIRPTA is a tax law that requires non-U.S. persons who sell real property in the United States to pay a tax on the sale. This law affects not only foreign individuals and entities, but also U.S. citizens and residents who purchase real estate from foreign sellers. Failure to comply with FIRPTA can result in significant penalties and fines.

As a business owner or individual who is considering selling or purchasing real estate from a foreign seller, it is crucial to understand the implications of FIRPTA. As your CPA, I can provide guidance and expertise to ensure that you are in compliance with all relevant tax laws and regulations.

One of the most important things to understand about FIRPTA is that it requires the buyer of real estate to withhold a certain percentage of the sales price and remit it to the IRS on behalf of the seller. The withholding rate is generally 15% of the sales price, but it can vary depending on the circumstances. If the seller is a foreign corporation, the withholding rate may be 21%.

There are several exceptions to the FIRPTA withholding requirement, such as if the sales price is below a certain threshold or if the seller provides a certification of non-foreign status. However, navigating these exceptions can be complicated, and it is important to work with a CPA who is experienced in FIRPTA compliance to ensure that you are taking advantage of all available exemptions.

At SRG Advisors LLC, we have extensive experience helping clients navigate the complexities of FIRPTA and other tax laws especially for New York City, Miami, Florida, New York and New Jersey clients. Our team of expert CPAs can provide personalized guidance and advice to help you achieve compliance and avoid costly penalties. Contact us today to schedule a consultation and learn more about how we can help with your FIRPTA compliance needs.