Private Client Services Partner, Thomas Giordano-Lascari, was featured in Thomson Reuters regarding the challenges associated with FIRPTA withholding requirements for foreign investments in U.S. real estate. This topic was discussed on a recent panel at a New York University tax conference in Berkeley, California.

Excerpts:

Karlin and Giordano-Lascari stressed it is “critical” for the transferor to have a taxpayer ID number because the IRS often struggles with matching withheld tax to taxpayers.

“[E]ven worse,” Giordano-Lascari said, is when there is an ITIN (or EIN for a corporation) and everything is in order with the tax withholding, but the IRS nonetheless sends a penalty notice because they couldn’t match the payments. “And six months later, you’re still arguing with them and then there are levies being threatened … This has happened to me more than once.”

He advised practitioners to “absolutely make sure that you’ve got evidence that the escrow agent or whoever was doing nothing has in fact, actually paid the money over. Make sure that the way they do it involves certified mail so that they can prove that the payment was made. Make sure that everything gets done as punctiliously as possible.” According to Giordano-Lascari, the IRS “isn’t set up for this.”

Giordano-Lascari recommended paying anyway and seeking a refund the next filing season to put the ball in the IRS’ court because the agency is more likely to issue a refund before it starts to bear interest than it is to respond to a withholding certificate application within the 90-day window.

The IRS is “not fast at all,” he said, “so you may actually be better off letting the tax get paid because at least now the burden is on the government.”

Resources

• Thomson Reuters