Selling a property can be a complex process, especially when it involves FIRPTA withholding for foreign sellers. If you sold a property in California in 2021 and had FIRPTA withholding deducted from your proceeds, you may be wondering if you can claim back the withheld funds, even if it's now 2025. In this blog post, we'll explore the possibilities and considerations involved in claiming back FIRPTA withholding from a property sale in California.
General explanation of FIRPTA:
Where a US property sale occurs, normally the US agents will abide by the FIRPTA rules and hold 15% on the gross sale price where a non resident seller has sold US real property (including land sales, timeshares, apartments and houses etc).
In normal circumstances you file a 1040NR Federal return to reclaim any overpaid FIRPTA tax (as tax is due on the NET sale but has been held on the GROSS sale).
Depending on the US state the property was located, you may also have to file a state tax return as well.
In the leading question - I sold California property in 2021 and they held 15%. It is now 2024, can I still reclaim this? What is the answer?
GOOD NEWS: as the sale occurred in 2021 and it is now 2025, you still have approximately 5 MONTHS left to make a reclaim of overheld US tax. All 2021 tax refund claims expire 15th June 2025. And as tax is held on the GROSS sale and you owe on the NET, there will be a sizeable refund due.
BAD NEWS: What about California? Well the first question is was state tax held on the sale? It was supposed to be held by the escrow or US agents. If it was, you file, declare and may have a slight refund. If NONE was held (or too little), then there is a problem: - tax is owed to California and should have been held at sale. - If it was not, a tax return should have been filed to calculate and pay the tax due by April 15th, 2022. - as we are now in 2025, this means penalties and late filing charges apply (and possibly interest) on any tax due since the payment deadline of April 15th 2022.
3. If you have no SSN or ITIN (US tax number), you will also need to apply for this at the same time as filing the 1040NR US tax return. IDEALLY THE WHOLE PACKAGE SHOULD BE FILED NO LATER THAN JANUARY OR FEBRUARY 2025, AS IT TAKES 2 TO 4 MONTHS TO OBTAIN THE ITIN AND THEN THE TAX RETURN IS FORWARDED FOR PROCESSING.
Seeking Professional Advice:
Navigating FIRPTA withholding and claiming back withheld funds can be complex, especially for non-resident sellers. It's advisable to seek professional advice from a tax attorney, accountant, or Enrolled Agent familiar with international tax laws and FIRPTA regulations. They can provide guidance on your eligibility, documentation requirements, and the process for claiming back withheld funds.
Can Just Breve help?
Yes, we can. Just Breve is a US tax accounting firm, assisting non-US persons with their US tax filing requirements, including filing a 1040NR and obtaining an ITIN. We assist in applying for a new ITIN or renewing an existing ITIN. We are a certifying acceptance agent (CAA) and have a contract with the IRS to help with Form W-7 ITIN applications (and EIN applications).
T: 0208 1444632
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