Nationwide Specialists in foreign-seller real estate withholding
📞 216-505-0717
For U.S. Buyers of Real Estate

Did you buy a property from a foreign seller?

Under IRC §1445, the BUYER — not the seller, not the closing agent, not the title company — is the statutory withholding agent for FIRPTA. If the seller turns out to have been a foreign person and the withholding wasn't handled correctly at closing, the IRS will pursue the buyer personally for the 15% withholding, penalties up to 25%, and daily interest. “I didn't know” is not a defense.

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The scenario nobody warned you about

An IRS notice two years after closing.

The setup: a U.S. buyer closes on a $900,000 property. The closing goes smoothly. Title company prepares the documents, funds wire, deed records, buyer takes possession. Nobody at the closing table flags FIRPTA — either because the closing file didn't surface that the seller was foreign, or because the non-foreign affidavit wasn't carefully checked, or because the seller represented through an LLC that looked domestic.

Eighteen months later, the buyer receives IRS Notice CP15 or CP504 from the Ogden Service Center: "You failed to file Form 8288 and remit FIRPTA withholding on the sale of [property]. Amount due: $135,000 plus penalties and interest."

The math:

  • $
    $135,000 — the 15% withholding on the $900,000 gross sales price that should have been sent to the IRS within 20 days of closing.
  • $
    +$33,750 — failure-to-deposit penalty up to 25% under IRC §6651.
  • $
    +~$15,000 — interest under IRC §6601, accruing daily from the closing date forward (compounded over 18 months at the federal underpayment rate).
  • !
    Total exposure: ~$183,750 — on a closing that the buyer thought was finished a year and a half ago.

The IRS pursues this against the buyer because IRC §1445(a) makes the buyer the legally designated Withholding Agent. The seller is back in their home country. The title company isn't a party. The closing attorney already collected their fee and moved on. The buyer is the one who answers the notice.

Why the buyer carries this

The statute makes the buyer the withholding agent.

FIRPTA — the Foreign Investment in Real Property Tax Act of 1980, codified at IRC §1445 — was specifically designed to put the burden on the buyer for a practical reason: the foreign seller doesn't stick around after closing. Once the wire hits the seller's account, they leave the country with the proceeds. The IRS has no jurisdiction to pursue collection abroad, so Congress built the enforcement mechanism around the party that DOES stay in the U.S.: the buyer.

The statute is mechanical:

  • Seller is a "foreign person" under §1445(f) (non-U.S. citizen, non-resident alien, foreign entity that hasn't elected §897(i) domestic treatment) — or any U.S. LLC with a foreign single-member owner that's "disregarded" for tax purposes
  • Buyer (or buyer's settlement agent on the buyer's behalf) MUST withhold 15% of the gross sales price at closing
  • Buyer MUST file Form 8288 + Forms 8288-A within 20 calendar days of closing, sending the funds and the forms to the IRS Ogden Service Center
  • Failure means the buyer's personal liability for the unpaid tax PLUS penalties and interest

The closing agent's responsibility ends with handling the mechanics. The buyer's liability never ends until the IRS confirms the obligation was met — which means stamped Form 8288-A copies returned by the IRS as proof.

Defense at closing

Four questions every buyer should ask before signing.

  1. "Is the seller a U.S. person or a foreign person under IRC §1445(f)?" — The closing file should answer this in writing. If the file doesn't address it, the issue isn't resolved. Don't assume "the title company would have flagged it" — many closings slip through.
  2. "Is there a signed Non-Foreign Affidavit in the closing file?" — If the seller IS a U.S. person, they sign a sworn affidavit stating so under penalty of perjury. The affidavit must include the seller's U.S. tax ID and current home address. The buyer is required to keep this affidavit for at least 5 years. A facially deficient affidavit (missing tax ID, unsigned, missing address) does NOT protect the buyer.
  3. "If the seller IS foreign, who is preparing Forms 8288 and 8288-A?" — The buyer needs to know WHO is handling the filing within the 20-day deadline. If the answer is "the title company will figure it out," that's a red flag — title companies typically do not prepare or file these forms, only hold the withheld funds in escrow.
  4. "What entity is the seller?" — A U.S.-formed LLC owned by a foreign person is FOREIGN for FIRPTA purposes (disregarded entities look through to the owner). A foreign corporation that hasn't filed a §897(i) election is foreign. Entity structure can disguise foreign status; check the operating agreement or §897(i) election copy.

For closings under $300,000 where the buyer intends to occupy the property as a personal residence, an additional protection exists: the §1445(b)(5) personal-residence exception eliminates withholding if the BUYER signs an affidavit committing to occupy the property as a residence for at least 50% of the days it's used in each of the first two 12-month periods after closing. Critically, this requires the BUYER's signed affidavit, not just a price under $300K.

Already closed?

If FIRPTA was missed at closing, act fast.

Three paths exist depending on how recently the closing happened and whether the IRS has already issued a notice:

Path 1: Within 20 days of closing

If FIRPTA was missed but it's still within the 20-day window from closing, the buyer can still file Form 8288 + 8288-A and remit the withholding on time. Penalties for filing on the 19th day are zero. This is the cheapest fix. Engage a FIRPTA specialist immediately and get the package mailed to IRS Ogden via tracked overnight before day 20.

Path 2: 21+ days after closing, no IRS notice yet

Voluntary compliance — file Form 8288 + 8288-A late, remit the withholding, and pay the failure-to-deposit penalty (typically capped at 10% if the filing is voluntary and within 30 days of the deadline). Coming forward voluntarily is dramatically better than waiting for an IRS notice, both for the penalty cap and for the avoidance of the willful-failure §7202 exposure.

Path 3: IRS notice already received

Stop, do not respond yet, and engage a FIRPTA specialist. The first move is to:

  • Determine whether the seller actually was a foreign person under §1445(f) (some IRS notices fire on incorrect information)
  • Recover any non-foreign affidavit the closing file contains
  • Confirm whether the seller's U.S. tax on the gain has already been paid — if the seller filed Form 1040-NR and paid the underlying tax, the buyer may be able to avoid the underlying withholding liability, though penalties and interest typically still apply (Treas. Reg. §1.1445-1(e))
  • Respond to the IRS notice within the deadline stated on the notice (usually 30 days)

Our office handles all three paths. Start a case at firptaincometaxwithholding.com/#intake — the intake form has a dedicated field for "IRS notice received: yes/no" so we can prioritize accordingly.

What we handle, for buyers

End-to-end FIRPTA compliance — so the IRS never knocks.

  • Pre-closing foreign-status determination — we screen the seller, the entity structure, and any §897(i) elections so the buyer knows BEFORE signing whether FIRPTA applies.
  • Form 8288 + 8288-A preparation for buyer-side compliance — with the correct IRS Ogden mailing address for the chosen carrier (USPS vs FedEx/UPS/DHL).
  • EFTPS enrollment guidance for buyers required to remit electronically.
  • 20-day-deadline tracking with same-day mailing via IRS-approved private carrier under IRS Notice 2016-30, qualifying for "timely-mailed-is-timely-filed" treatment under IRC §7502.
  • Post-filing follow-up to confirm IRS receipt and obtain stamped 8288-A copies for the buyer's permanent file — the proof the buyer's withholding-agent liability is closed.
  • Post-closing rescue work when FIRPTA was missed — voluntary compliance, IRS-notice response, settlement coordination.

Buyer-side engagement & consultation is included in the closing-package fee — no separate $250 onboarding charge for buyers. We bill the buyer directly under a buyer-side engagement letter; the title company sees no invoice and the closing settlement statement stays clean.

Closing on a property? Get FIRPTA right.

Three minutes to start a case. Same-day response from our office.

Start a buyer case →  Or call 216-505-0717