The Foreign Investment in Real Property Tax Act requires buyers in certain transactions involving foreign sellers to withhold funds for federal taxes. Does either agent have liability in such a transaction where the seller falsely certifies that he is not a foreign seller?
Possibly. If an agent knows that a certification is false and fails to notify the buyer of this knowledge, that agent will be responsible for paying the tax to the IRS. This payment is limited to the amount of commission that the agent earned in the transaction.
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26 Comments on "When an Agent Could Be Liable for Taxes From a Foreign Seller"
More education on the topic would be helpful.
Well said, Raul. With the best interest of our clients in mind, we should always share what information is available and encourage clients to seek experts in the matter. It’s the client ultimately who makes the decision. Education is the key.
This is an excellent point. It almost feels as if this is a scare tactic for agents and brokers and yet it seems as if a random email newsletter update would include more than just a “possibly” without giving us any tangible education.
‘United States Person’ is a tax agent for non-resident aliens or alien corporations. Read Income Tax: Shattering The Myths by Dave Champion!
Why on earth this is any agents responsibility to make this determination, not the title office owner/lawyer who knows the law especially immigration and nationality, the notory who has training about the documentation ??
AGREE 100%
Let’s see. It says, I am not an attorney, engineer, inspector, etc. Maybe we need to add neither am I an IRS agent nor know anything about immigration rules. This can be put in the Title Company’s lap. Nor do I want lessons on how to be one.
Amen to the above comment.
Don’t ask don’t tell. It worked in the army for 30 years. Just another example of trec as a useless organization. Realtors have to be responsible for every little thing envolving real estate transactions and problems with the home. Its no longer “buyer beware”. “Its realtor beware”. I’m glad I’m retiring in 3 years.
I agree. We should bring this up to our brokers
Good answer. Title Co should ask Seller . The way they are asked if they have liens that seem to be in their name.
That’s the nail on the head.
Paragraph 20 of our contract; we talk about it each and every day in our classrooms at champions school of real estate.
I strongly feel the title company carries a great amount of responsibility in determining and veryfying this matter. They are the ones handling the money and handling sensitive info like ID’s & SS #’s.
Realtors are not attorneys and cannot give legal advice.
100 % correct
I don’t believe citizen/non-citizen is the defining characteristic. What if you are a permanent resident ie green-card holder?
Agreed. IRA has specific methodology to determine ” Residential Alien” and ” Nonresidential Alien”. I couldn’t find the definition of ” Foreign person” from TREC’s perspective so far. Maybe someone can give me some clues.
Is there a certain Disclosure we can give to ALL sellers and buyers regarding this withholding. That would make it easier and
I think the purpose of this article is just disclose the seller (either a husband or wife) is a “foreign person” . And be sure to notify buyers. I sold a condo with a husband who is not a U.S. citizen (due to Texas’ community law), and still got like 6 bids in 2016. I think what matter more is the location and the value of the property. Plus the IRS gives out exemption to FIRPTA tax. Your Title Company and CPA are versed in this area. If not, you need to find one that is.
My firm handles FIRPTA from start to finish making it as easy as ordering an appraisal. If you would like us to put on a FIRPTA presentation, give my office a call 281-578-1040 Tax Solutions http://www.taxss.com | info@taxss.com