Foreign Investment in Real Property Tax Act of 1980 (FIRPTAJ
Foreign Investment in Real Property Tax Act of 1980 is a law that was designed to ensure that nonresident persons who have a US tax liability on appreciated US real property pay these taxes. When a nonresident person (or entity) sells US real property, FIRPT A requires a 10% withholding tax based on the gross selling price. However, certain forms can be filed before the close of escrow that can reduce the withholding to 10% of the gain, rather than on the sales price. Further, withholding does not apply to all sales transactions.
Often the title companies, who manage the withholding, do not fully understand the rules and apply them incorrectly. If this happens, the sellers cannot get their money back until they file tax returns the following year. This is an area where if you do not know the rules or you do not have a qualified advisor helping you through the process, it can be difficult to get answers on the timely basis required to prevent an unnecessary loss of access to your money.