Any sale of U.S. property by a Canadian resident must be reported to the IRS using these forms. Forms 8288 and 8288-A are required in all cases, while Form 8288-B is only required if you are applying for a withholding certificate for an exemption or reduction from the statutory amount of withholding prescribed by the IRS.
Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests
Withholding Form 8288 is used by the buyer(s) or withholding agent to report the amount of tax withheld from the purchase of property from a Canadian seller.
This form is also used as the transmittal form for Form 8288-A. The buyer(s) are required to file Form 8288 and remit the FIRPTA withholding by the 20th day after the date of the sale.
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Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests
The buyer(s) must prepare Form 8288–A for each seller from whom tax has been withheld. There are three copies of this form. Copies A and B are attached to Form 8288, and copy C is kept by the buyer(s) for their records.
If you have an existing ITIN (Individual Taxpayer Identification Number)
The IRS will:
- Apply the withholding tax to your ITIN.
- Issue a final tax slip—a stamped copy B with a control number—and send it to you.
You are then required to file U.S. tax returns, along with the stamped copy of Form 8288–A. The final tax obligation will be determined on your U.S. tax return and any amount owing or refundable will be settled at this time.
If you do not have an existing ITIN
- You should apply for the number immediately upon closing. The ITIN application takes 12 weeks, so the IRS will not be able to immediately apply the withholding tax.
- The IRS will send a letter stating that the final tax slip cannot be issued as they do not have an ITIN. Upon you providing your ITIN to the FIRPTA team within the IRS, they will apply the withholding tax to your ITIN and issue a final tax slip—a stamped copy B with a control number—and send it to you. You will then be able to file your U.S. tax return.
Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests
Form 8288-B is used in situations where you are applying for an exemption or reduction from the prescribed withholding rates on the sale price of the property.
If the application is for a reduction of the withholding amount, the application will include a calculation of the expected capital gains tax in addition to all supporting documentation to demonstrate to the IRS that the taxes owing will be less than the amount of the withholding.
As long as this application is made on a timely basis (i.e., before closing), the escrow agent will be authorized to hold the withheld funds in escrow until the IRS processes the application, which is a minimum of 90 days.
Once the application is approved and the revised amount determined, the escrow agent must then remit the requested amount to the IRS and the remaining balance to you.
The application, calculations, and compilation of required documentation may be completed by you, or by us on your behalf, or by the buyer or the buyer’s agent. If you are applying for the withholding certificate, you must notify the buyer(s) in writing on the day of, or the day prior to, the sale.
Do All These FIRPTA Tasks Feel Overwhelming?
It’s totally understandable if they do. Any complex task you try for the first time can make you feel that way.
That’s why we’re here. We’ve helped many Canadian clients through this process, and we can do the same for you, virtually or in person. From the time you list your property for sale through to the filing of the various tax returns, we’ll help you through every step of the way, so you can breathe easy and spend your time on more enjoyable things.
Contact us today to get started, and we’ll get back to you within one business day.