FIRPTA Compliance for Title Agents: Withholding, IRS Rules & Tax Recovery | Title Agents Podcast Ep20

Episode Summary

Marc Enzi breaks down FIRPTA compliance for title agents handling foreign seller transactions. Learn why FIRPTA is a deposit not a tax, how the 15% withholding works on gross sales price, who the IRS holds responsible, and the 20-day deadline to remit funds. Marc explains green card holder exemptions, substantial presence tests, common IRS processing errors, penalty avoidance strategies, and the three-year window for sellers to recover withheld funds. Includes practical advice on early identification, tracking requirements, and when to engage specialists.

About Marc Enzi

Marc Enzi, CFP®, EA is a Certified Financial Planner and Enrolled Agent specializing in FIRPTA compliance and international tax law at Tax Solutions. With over 20 years of experience in accounting, finance, and tax, including time at PricewaterhouseCoopers, Marc has built a niche practice helping title companies, buyers, and foreign sellers navigate Foreign Investment Real Property Tax Act transactions. He handles IRS audits, penalty abatement, and refund recovery for foreign property sellers. Marc is a U.S. Marine Corps veteran who taught navigation and now teaches FIRPTA compliance classes nationwide.

Key Takeaways

• FIRPTA requires withholding 15% of the gross contract sales price from foreign sellers, not 15% of net profits, even if the seller loses money on the transaction.
• The buyer is the withholding agent legally responsible to the IRS, not the title company, though title companies face no IRS risk when they simply print and mail the check on the buyer’s behalf.
• Green card holders are treated as U.S. tax residents and exempt from FIRPTA withholding if they sign a certificate of non-foreign status, regardless of citizenship.
• The IRS must receive FIRPTA funds within 20 days of closing; missing this deadline by even one day can trigger 5% penalties on six-figure withholding amounts.
• FIRPTA withholding is a refundable deposit, not a tax; foreign sellers typically owe little or no tax after claiming their cost basis, improvements, closing costs, and $45,000 standard deduction per person.
• Foreign sellers have only three years to file a tax return and claim their FIRPTA refund before the money is permanently forfeited to the IRS.
• Title agents should identify foreign sellers early in the transaction by asking about tax residency status and checking for social security numbers, ITINs, or green cards to avoid last-minute closing delays.

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