Navigating federal tax requirements when selling real estate as a non-citizen in New York can be complex. Natalia A. Sishodia (https://sishodia.com/should-i-withhold-firpta-at-closing-on-sale-of-ny-home-if-i-am-not-a-citizen/), a New York foreign investment lawyer at Sishodia PLLC, offers guidance for buyers and sellers dealing with the Foreign Investment in Real Property Tax Act (FIRPTA). FIRPTA mandates that a portion of the sale proceeds be withheld when a foreign person sells U.S. property, and Natalia A. Sishodia works with clients to ensure compliance and avoid costly penalties.
For those involved in transactions with non-citizen sellers, FIRPTA requires buyers to withhold 15% of the gross sale price and submit the amount to the IRS. A New York foreign investment lawyer can provide direction on documentation, deadlines, and legal steps to ensure both parties meet federal requirements. Natalia A. Sishodia explains that this process includes filing IRS Forms 8288 and 8288-A within 20 days of the property transfer, a deadline that often surprises unprepared buyers and sellers.
Every transaction involving a foreign seller brings a different set of conditions. Natalia A. Sishodia, a New York foreign investment lawyer, stresses the importance of confirming seller status early and ensuring all paperwork is in order before closing. If the seller qualifies as a foreign person under FIRPTA, failure to withhold the correct amount could lead to financial consequences for the buyer. Title and escrow companies may assist in logistics, but legal liability falls on the buyer.
According to Natalia A. Sishodia, FIRPTA withholding is based on the amount realized—not the seller’s profit. In most cases, this means 15% of the gross sales price. However, if the buyer intends to use the property as a residence and the purchase price is between $300,000 and $1,000,000, a 10% withholding rate may apply. For sales under $300,000 with an intent to reside at the property, withholding may not be required. A New York foreign investment lawyer can help determine which rate applies and assist in meeting the requirements.
For buyers, confirming whether the seller is a foreign person is a legal responsibility. Natalia A. Sishodia notes that a foreign person may be a nonresident alien individual, a foreign corporation, partnership, trust, or estate. If the seller is not a foreign person, a certification of non-foreign status—such as a completed IRS Form W-9—should be obtained and retained. This document must be kept for five years after the transaction.
Delays in securing taxpayer identification numbers can disrupt the closing process. Natalia A. Sishodia, a New York foreign investment lawyer, advises foreign sellers to ensure that all tax identification documents are valid before initiating the transaction. Expired Individual Taxpayer Identification Numbers (ITINs) can lead to rejected applications and delayed processing of Form 8288-B, which requests a reduced withholding amount.
A properly completed Form 8288-B can delay payment until the IRS decides on the withholding certificate. However, errors or incomplete information can result in rejection. Natalia A. Sishodia emphasizes filing early and including accurate information to minimize the risk of unnecessary withholding. If the IRS has not responded by the time of closing and no certificate is issued, the full withholding amount must be submitted by the buyer.
Penalties for failing to withhold when required under FIRPTA are significant. The IRS may hold the buyer personally liable for the unpaid tax, in addition to charging interest and penalties. Natalia A. Sishodia warns that willful failure to comply may lead to penalties of up to $10,000 and, in extreme cases, charges of tax evasion. For sellers, failing to report income or filing incorrect returns can trigger audits and additional financial liabilities.
A withholding certificate may adjust or eliminate the required amount if the IRS determines the tax liability is lower than the standard withholding. Natalia A. Sishodia works with clients to ensure timely submission and accurate documentation to avoid disruptions to the transaction. If a certificate is applied for, funds must still be submitted within 20 days of receiving the IRS response.
FIRPTA compliance requires early planning and precise execution. Working with a New York foreign investment lawyer ensures that buyers and sellers understand their obligations, timelines, and documentation requirements. Natalia A. Sishodia helps clients minimize legal exposure and complete real estate transactions without unnecessary delay or risk.
The risks of noncompliance can be avoided with early preparation and guidance. FIRPTA withholding rules may be confusing, but legal support from a New York foreign investment lawyer such as Natalia A. Sishodia can ensure the transaction proceeds smoothly and lawfully. Legal guidance can help confirm the seller’s status, file proper forms, and coordinate with title companies to release funds accurately at closing.
For foreign investors selling or buying property in New York, understanding FIRPTA is critical. Natalia A. Sishodia helps clients manage timelines, gather documentation, and complete IRS filings, reducing the risk of penalties and ensuring compliance with federal regulations.
About Sishodia PLLC:
Sishodia PLLC is a New York-based real estate law firm led by Natalia A. Sishodia. The firm serves both domestic and international clients in high-end real estate transactions. Services include legal support for property purchases, sales, estate planning, and multi-jurisdictional tax planning. The firm is committed to offering clear legal guidance for individuals and businesses operating in the New York real estate market.
Embeds:
Youtube Video: https://www.youtube.com/watch?v=_Y2XBe3fZUU
GMB: https://www.google.com/maps?cid=12450537318741950980
Email and website
Email: natalia@sishodialaw.com
Website: https://sishodia.com/
Media Contact
Company Name: Sishodia PLLC
Contact Person: Natalia A. Sishodia
Email: Send Email
Phone: (833) 616-4646
Address:600 3rd Ave 2nd floor
City: New York
State: New York 10016
Country: United States
Website: https://sishodia.com/
