🌍 FIRPTA Withholding ≠ Automatic Refund: What Every Closing Agent Should Know
Title professionals and attorneys should be careful when explaining FIRPTA withholding. The 15% withheld is not guaranteed to be refunded, and improper advice can create risk for buyers, sellers, and
As we celebrate the Fourth of July — a day rooted in accountability and structure — it’s a fitting moment to clarify a common FIRPTA misconception:
“They’ll get the 15% back when they file.”
Not necessarily.
Title professionals and attorneys often hear this at the closing table. But the facts are:
🔹 FIRPTA withholding is not guaranteed to be refunded.
It’s a prepayment of tax, not a refundable deposit.
🔹 If the seller recognizes a gain, the IRS will keep some or all of the 15%.
The final outcome depends on the actual tax liability, not the amount withheld.
🔹 No tax return, no refund.
Many sellers miss this step, especially nonresident individuals unfamiliar with U.S. tax compliance.
🔹 Improper advice can create liability.
Sellers relying on inaccurate assurances may refuse to cooperate later — and the withholding agent may still be exposed.
As the withholding agent under IRC §1445, the burden sits with the buyer or settlement agent — not the IRS — to get it right.
Let’s keep celebrating independence the right way:
With clear facts, proper procedures, and smart risk management.
