How U.S. Sellers Can Use the FIRPTA Affidavit Form to Avoid Tax Withholding?

Foreign investors in U.S. real estate are subject to complex tax rules under the Foreign Investment in Real Property Tax Act (FIRPTA). One of the often-overlooked but highly significant documents involved in FIRPTA compliance is the FIRPTA affidavit form. This document can play a pivotal role in exempting a real estate transaction from mandatory withholding—but only if handled properly.

Firpta Tax Returns, a trusted name in U.S. real estate tax compliance, breaks down everything you need to know about the FIRPTA Affidavit Form: its purpose, use cases, who needs it, and how it fits into the broader FIRPTA landscape.

What is the FIRPTA Affidavit Form?

The FIRPTA Affidavit Form is a written statement provided by the seller in a real estate transaction affirming their non-foreign status. The affidavit typically includes:

● The seller’s name

● U.S. taxpayer identification number (TIN or SSN)

● Declaration of U.S. citizenship or resident alien status

● Signature and date

This form is used to certify that the seller is not subject to FIRPTA withholding, thereby potentially eliminating the need to withhold 15% of the gross sales price from the proceeds.

Why Is It Important?

Without a completed FIRPTA Affidavit Form, buyers and settlement agents may be required to withhold a substantial percentage from the seller’s proceeds and send it to the IRS. This can complicate closing, delay payments, or result in unnecessary financial strain for sellers.

In essence, the affidavit acts as a safeguard for both parties in the transaction—protecting buyers from IRS penalties and allowing qualified sellers to avoid the FIRPTA withholding tax altogether.

Who Needs to File It?

The FIRPTA Affidavit Form is primarily used by U.S.-based sellers of real estate who are looking to certify that FIRPTA withholding does not apply to them. However, it’s equally important for buyers, escrow agents, and real estate professionals to be aware of this form, as they bear the responsibility of ensuring proper withholding—or lack thereof.

Real estate attorneys and Certified Acceptance Agents (CAAs) can guide both buyers and sellers through this documentation process, ensuring IRS compliance.

When and How to Use the FIRPTA Affidavit?

The affidavit should be completed at or before the closing of a real estate transaction. Once signed, it’s typically retained in the closing documents and may be requested in the event of an IRS audit.

Here are key requirements:

● It must be signed under penalty of perjury

● It should clearly state the seller’s non-foreign status

● It must include a valid U.S. TIN

● It is usually not filed directly with the IRS, but retained for legal documentation purposes

Common Scenarios for FIRPTA Affidavit Usage

● Domestic U.S. citizens selling their property: No FIRPTA withholding applies, and the affidavit proves it.

● Resident aliens with green cards: Can use the form to avoid withholding as long as they meet U.S. tax residency requirements.

● Buyers unsure about the seller’s status: Require the FIRPTA Affidavit to avoid IRS penalties.

● Sellers claiming exemption under other FIRPTA rules: May use the affidavit in tandem with a Firpta Exemption request.

Key Considerations and Misconceptions

● Not all sellers qualify: Only U.S. persons (as defined by the IRS) can use this form to claim exemption from withholding.

● It does not replace Form 8288 or 8288-A when withholding is necessary—it’s simply a tool to avoid the need for those forms in qualified transactions.

● Mistakes in the affidavit can lead to IRS audits or penalties for the buyer. That’s why professional review is strongly recommended.

The Role of Firpta Tax Returns

Firpta Tax Returns specializes in FIRPTA compliance and offers comprehensive services to guide sellers and buyers through proper documentation, including the preparation and review of the FIRPTA affidavit form. Their team works with certifying acceptance agents, real estate agents, and attorneys to ensure transactions are compliant and withholding is only applied when truly necessary.

For foreign sellers, they also offer assistance in filing for a Firpta Exemption, obtaining ITINs, and securing timely FIRPTA tax refunds when withholding has already been applied.

The Bottom Line

The FIRPTA affidavit Form may look like a simple document, but it carries serious legal weight. Whether you're selling your home or managing a high-stakes commercial real estate deal, ensuring proper completion of this form is critical. By certifying the seller’s non-foreign status, this form can help avoid unnecessary tax withholding and simplify the closing process.

Si, if you are uncertain about your FIRPTA responsibilities, consult with Firpta Tax Returns today. From affidavit preparation to helping with a Firpta exemption, they have got the expertise to ensure you're protected and compliant.

Contact Firpta Tax Returns now for accurate filing, IRS compliance, and peace of mind.