6 minute read
Global Business Council
By: Jessica Gruener, Senior Accountant, Kerkering, Barberio & Co. A t some point in your career as a licensed Realtor®, you may find yourself working with a foreign national who is selling their home. There are several things that you should keep in mind and inform them of at the point of listing their property for sale. While I do not advise you trying to handle these items on their behalf, just mentioning these few things to them or connecting them with someone who can assist them can go a long way. Forewarning your foreign national clients of what is to come will not only allow you to set the pace for a successful closing but will also make you stand out as a knowledgeable professional. WILL THE FIRPTA WITHHOLDING APPLY?
I am sure many of you have heard of FIRPTA withholding or have had some experience with it in your career. Depending on the sales price, the required FIRPTA withholding amount could be a substantial amount of money that the seller will potentially not receive at closing. Quite often, foreign nationals have never even heard of FIRPTA withholding, and it is a shocking discovery for them. It will never hurt to have your customer seek out advice from their accountant who has experience in FIRPTA withholding on their possible withholding options and estimated tax liabilities. DOES YOUR FOREIGN NATIONAL SELLER HAVE A U.S. TAX IDENTIFICATION NUMBER?
This can be the most difficult part for foreign nationals. The process of getting a U.S. Individual Tax Identification Number (ITIN) requires a passport certification and an original signature on Form W-7. Unlike all the technological advancements we use on a day-to-day basis, this process has not changed with technology. For a Canadian resident, the Canadian Passport Office provides the service of issuing certified passport copies. For United Kingdom residents, however, the passport office does not offer an IRS acceptable certified copy of their passports. There are a couple of options available for getting the certified copy of their passport, but the easiest option is for them to meet with a Certified Acceptance Agent (CAA) while they are in the U.S. If that is not possible, here are the additional options: 1 | They can get the certified copy of their passport from the U.S. Embassy. However, obtaining an appointment at the U.S. Embassy may be difficult or impossible for your customer depending on where they live. The IRS has a listing of all CAAs who are registered to do passport certifications. Your customer could look to see if there are CAAs in their area to handle their ITIN Application. 2 | The IRS allows a CAA to do the passport certification via video conference. However, this option requires your client to send their original passport to the CAA for the video conference. WHAT HAS THIS PROPERTY BEEN USED FOR?
You should find out if your foreign national seller has been renting the property or just using it for personal use. Under U.S. law, foreign nationals are subject to 30 percent withholding on the gross rental income. Unless the foreign national makes the election to treat the property as effectively connected with the conduct of a U.S. trade or business, the 30 percent withholding is required to be remitted to the IRS each year the property is rented. If the election was made, a U.S. income tax return should have been filed each year to report the rental income and expenses. DID ONE OF THE OWNERS PASS AWAY?
This may seem like an unusual question to ask your foreign national seller, but it is one of the most important ones. Unlike U.S. tax residents, foreign nationals only receive an estate tax exemption of $60,000. If the fair market value of the property at the time of decedent’s death exceeded $60,000, an estate tax return was required to be filed within nine months after the decedent’s date of death. If the return was not filed, the IRS Estate Tax Closing Letter and Transfer Certificate would not have been issued clearing the asset of any potential estate tax liability. Not having these two IRS documents at the time of closing can potentially delay your foreign national seller from receiving their sales proceeds. If the estate tax return had not been previously filed, it is crucial to advise them to speak with a knowledgeable tax professional to have this return filed as soon as possible. IS A U.S. INCOME TAX RETURN REQUIRED EVEN IF THERE IS A LOSS ON THE SALE?
I have heard this question time and time again, and, without exception, the answer is yes, the foreign national seller is required under U.S. law to comply with these tax filings. Although your foreign national seller may be taking a loss on the sale of their property, they still are required to file a U.S. income tax return to report the sale and obtain a U.S. tax identification number. This is a federal requirement, and the only way for them to get refunded any FIRPTA withholding monies that may be due to them. • Jessica Gruener is a Senior Accountant at Kerkering, Barberio & Co., in the International Department. She assists clients with inbound international tax matters. Jessica serves as a committee member on the RASM Global Business Council. This article is meant as a guide for educational purposes only. It is not intended to serve as tax advice and should not be used as a substitute for consultation with a tax professional. myRASM.com | 27
RASM NEWS Employee Anniversary R ASM happily recognizes the workplace anniversaries of our professional staff.
Cynthia Small, Member Services
Coordinator, works in the temporary RASM North Member Service Center. Her primary responsibilities include processing membership applications and office transfers, assistance with MLS questions and services such as listing transfers and reciprocal listings, sales and assistance with Supra keys and lockboxes, processing store sales, and helping RASM members with other membership services and questions.
Cynthia truly enjoys assisting RASM members and strives to be an asset to the membership and to the wonderful RASM staff.
Her hobbies include reading, raising orchids, cooking, thrifting, and traveling. She lives in Bradenton with her husband, Greg, and her dog, Chloe. •
Sources: Forbes, USA Today
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Clean and disinfect your home thoroughly. Finish up any DIY jobs and work on your home’s curb appeal. Reschedule any in-person open houses, ask your Realtor ® to create a video tour and schedule an online open house. Use teleconferencing and e-signing programs to negotiate contracts. Be flexible. Know that your closing dates could shift, so be sure to account for potential delays. Don’t panic. People have more time now to house-hunt, and everyone needs a place to call home. When the stay-at-home order is lifted, you’ll be ready.
IF YOU’RE SELLING YOUR HOUSE DURING THE PANDEMIC
5 THINGS TO DO
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