Who actually withholds the FIRPTA tax, me or the buyer?
The buyer. The regime works by making the purchaser responsible for holding an amount out of the price and remitting it, which is why it is enforced so consistently: the person who has to part with the money is not the person whose tax it is. For a seller there are two practical consequences. You will not see part of your proceeds at closing, whatever the contract says about the price, and you cannot fix that by telling the buyer or the closing agent that your tax will be lower. Their exposure is to the Internal Revenue Service, not to you, so they will act on a document from the tax authority and on nothing else.
Can I get the FIRPTA withholding reduced before closing?
That is what the certificate route is for. Instead of an amount fixed against the sale price, you ask for a determination based on the tax the sale is actually expected to produce, supported by the numbers behind it: what you paid, what you spent on the property, what it is selling for and what the resulting gain computes to. The application has to be made in relation to the transaction, with the evidence attached, and it has to be in hand at the right point in the closing process to be of any use. If it is granted, the closing agent holds back on the determined basis. If the sale closes first, that route is gone and the only way to the same answer is a return.
How do I get the FIRPTA money back after selling?
By filing a United States return for the year of the sale. The amount held out of your proceeds is a payment on account, calculated against the price, and the return is where the actual gain is computed against your cost, your improvements and your selling costs. The difference comes back through that filing. Two things slow it down. You need a United States taxpayer identification number, and applying for one alongside the return adds a cycle if it was not obtained earlier. And the return cannot be filed before the year has ended, so a sale early in a year leaves the money with the authority for the rest of it. That wait is the strongest argument for dealing with the certificate before closing.
Does FIRPTA apply if I sell my US property at a loss?
Yes. The withholding attaches to the disposition and is measured against the price, not against your profit, so a sale at a loss still produces an amount held out of the proceeds. Sellers complain about this more than any other feature of the regime, and it is also a clear case for the certificate route: where the computation shows no gain, the expected tax is what the determination is based on, and the withholding can be brought down to match it. Doing that requires the loss to be evidenced before closing, from the original purchase documents, the capital spending and the selling costs. Left until afterwards, the loss is still allowable but you finance it for a filing cycle.
Do I need a US tax number to sell US property?
In practice yes, and getting it is the step sellers leave too late. A certificate application and a return both identify you by a United States taxpayer identification number, so without one the application has nothing to attach to and the return cannot be processed. The application for the number is its own process with its own requirements about identity and status. If you are selling jointly, each owner needs their own. The sequence that works is to start the number before the property is listed, so that when an offer arrives the certificate application is the only thing left to prepare. The sequence that does not work is discovering the requirement in the week of closing.
Does FIRPTA apply to shares in a company owning US property?
It can. The regime is written around interests in United States real property rather than around deeds, and an interest in a company whose value rests on property there can fall inside it. That makes a share sale a question to be tested rather than assumed either way, and the test is about the composition of the company's value rather than the label on the asset being sold. It matters to both sides of the deal: if the interest is within the regime the buyer carries the withholding obligation, and a buyer told after the event that they should have held back is left with an exposure of their own. Settle it in writing before the purchase agreement is signed.
What does "received a distribution from a foreign trust" mean on my return?
It is asking whether the trust conferred anything on you during the year — cash, property, or the use of trust property, including rent-free occupation of a house and, in some circumstances, a loan. Answering yes brings an information return, and where the distribution includes income accumulated in earlier years the tax computation can carry an interest charge for the delay. Trust accounts showing the composition of the distribution are what keep that computation from defaulting against you. See Form 3520.
Can I avoid capital gains tax on a foreign property?
Not by virtue of it being foreign — there is no exemption for that, and the "keep it offshore" advice you may have read is how people acquire penalties rather than savings. What genuinely reduces the gain is ordinary and legitimate: principal residence relief where the property qualifies and the designation is made correctly, a properly built cost base including acquisition costs and capital improvements, the timing of the disposition, the treaty rules for real property, and credit for the foreign tax paid. See principal residence and foreign property.
