Important FIRPTA Update for non-US citizens planning to sell real estate

Important FIRPTA Update The IRS has revised the rules for the interview process when applying for an ITIN! When a Non-U.S. resident sells U.S. real estate, they are required to have an Individual Tax ID Number (ITIN). This is done by completing form W-7, and having your passports and identity verified by a Certified Acceptance Agent (CAA). Typically, the CAA verifies the applicant’s passport in person with a face-to-face interview. However, sometimes applicants cannot travel to the U.S. because they are elderly, sick, have problems with VISAs, etc.  In these situations, the IRS has allowed a Skype interview with the CAA if the applicant sends their original passport or a certified copy of their passport to their CAA for review. While it does take some extra time and cost, this method has still helped many applicants successfully obtain their ITIN when selling their U.S. property. IRS updates have now changed this! On April 17, 2017, the IRS sent out notification to all CAAs stating that “U.S. based CAAs can only assist applicants who reside abroad through face-to-face interviews when they are temporarily in the country.” We immediately responded, asking for clarification on conducting Skype interviews as we have in the past. The IRS responded confirming that U.S. based CAAs will no longer be able to conduct interviews with foreign clients via video-conferencing. It is clear that the interview must be held with the U.S. based CAA in a face to face interview in our office while the foreign applicant is visiting here in the states. As if the IRS doesn’t make our foreign friends jump through enough hoops already when selling U.S. real estate, this throws another hurdle in it! If the non-U.S. resident is applying for an ITIN and cannot be in the U.S. to interview with a CAA, they will now need to either find a CAA in their home country to conduct the interview, visit a Taxpayer Assistance Center in their country, or mail a completed W-7 form with their required identification directly to the IRS. How can I help my foreign sellers prepare so their transaction is successful? Preparation is key. As soon as you start working with a foreign seller, find out if they have an ITIN. If they don’t, you’ll want to set them up with someone who can help them apply for one. Even if they don’t have a contract on their sale, they can still have their passport verified by a CAA if they are in town. This way any issues are avoided when applying for the ITIN if they should go back to their home country later. If they will not be in the U.S. any time during the listing or contract period, they will need to find a CAA in their home country. The sooner the foreign seller is aware, the more time they will have to locate a CAA in their country and make an appointment with them. One of things you do not want to do is trying to switch, or quit claim, the deed from one foreign person to another or to a corporation, LLC or trust prior to the sale, as this will trigger the FIRPTA tax on the flip, and potentially putting the foreigner in a real bind with the IRS. As a Realtor, one of the best things you can do for your customers is educate them. Make them aware of this process, and let them know you work with a great firm that can help them with all the steps required to apply for their ITIN!