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  • Daniel Gray CPA US Tax Services Toronto Canada

Early refund request from IRS on US property sale withholding will come this much sooner than same r

Ah, where to find answer that IRS or no one else on the web discusses and this answer is impacting your ability to make a logical decision of how to proceed. Here you go.

You know your USA property sale will be at a loss with no tax due to IRS and therefore have no interest in providing 15% withholding of the sales price to IRS and only able to claim it back after a very prolonged period. So, you prepared a withholding exemption certificate. But – the buyer refused to acknowledge it and anyway remitted withholding to IRS or you only provided it to buyer after closing. What now?

With some modifications and additions, you can use that withholding exemption certificate to request an early refund of the FIRPTA withholding from IRS. That will get you your refund much sooner than waiting for IRS to process a refund claim (IRS website described this as a six month process from the time it receives your return) made on a 1040NR return with a due date of June 15 in the year following the sale. How soon will that early refund be issued?

The answer is within 90 days of processing the early refund claim and within the same year of withholding.* How do I know that? I peeked at the IRS internal manuals on processing these forms and it states so therein. * IRS motivation to be speedy is that it isn’t interested in paying any interest on the refund.

Note that within 20 days of closing buyer files an 8288-A copy for IRS to process to seller and IRS needs that ‘credit slip’ to process the early refund.

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