Reduced withholdings on Selling a US Real Property

If a non-resident is selling US Real Estate the seller must pay tax to the IRS on the gain. The gain is calculated and the actual amount of tax is calculated on a US tax return. 

The buyer of the US Real Estate must withhold 10% of the purchase price and send it to the IRS as a tax instalment on behalf of the seller. This tax must be sent to the IRS within 20 days of the purchase date.

If the taxes that will be owed to the IRS on the gain realized on the sale of the US Real Estate when the US tax return is filed is less than 10% of the gross selling price Form 8288-B can be filed with the IRS to obtain permission to have the withholding taxes reduced to the actual taxes which will actually be owing. 

Form 8288-B must be sent to the IRS on or before the date of the transfer of the property and the seller of the US Real Estate must tell the buyer that he or she has applied for a lower withholding rate.

The buyer must withhold 10% of the selling price in trust until the withholding certificate is issued by the IRS.

The IRS generally responds to the application for a reduced withholding within 90 days. Once the withholding certificate is received by the seller the buyer has 20 days to pay the excess withholding which is not required to be withheld by the IRS to the Seller.

We need a copy of your purchase agreement for the property sold and the sales agreement for the property being sold to file Form 8288-B on your behalf.