Blog · 16 October 2026

FIRPTA Withholding on Foreign-Owned Real Estate: Form 8288 Lessons for US CPA Firms

By Keshav Bansal, CA

FIRPTA withholding is back in the spotlight after FedWeek (October 13, 2026) reported that the Office of Special Counsel credited an IRS whistleblower for strengthening oversight of foreign-owned U.S. real estate filings. For US CPA firms, the lesson under IRC §1445 is that the buyer—not the seller—is generally the withholding agent when a foreign person disposes of a U.S. real property interest, and that Forms 8288 and 8288-A are how that tax is reported and remitted.

What the OSC whistleblower and TIGTA found

According to FedWeek’s summary of the OSC announcement, FIRPTA withholding-certificate decisions are made at the IRS facility in Ogden, Utah (which took over that work from Cincinnati around 2010). The whistleblower told OSC that examiners in Ogden were assigned the work without sufficient training or a functioning FIRPTA coordinator, contrary to the Internal Revenue Manual. As of February 26, 2026, the team had 7,435 related filings awaiting processing, and its principal written guidance was a three-page job aid issued in 2014.

OSC referred the disclosure to the Treasury Inspector General for Tax Administration (TIGTA). FedWeek reports that TIGTA confirmed the gaps—no formal training for several FIRPTA work types, informal instruction, an untracked backlog—and could not determine whether withholdings, penalties, or interest went uncollected. The IRS then designated a coordinator, began training, revised related correspondence, and started working the backlog.

The §1445 rule CPA firms must brief buyers and sellers on

Under 26 U.S.C. §1445(a), when a foreign person disposes of a U.S. real property interest, the transferee generally must deduct and withhold a tax equal to 15% of the amount realized on the disposition. That is not 15% of gain. The IRS FIRPTA withholding page defines amount realized as the sum of:

• cash paid, or to be paid (principal only);
• the fair market value of other property transferred, or to be transferred; and
• any liability assumed by the transferee or to which the property is subject immediately before and after the transfer.

In most cases the buyer is the withholding agent and is liable if the required tax is not withheld. The IRS says withholding is reported on Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests, and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests. Form 8288 instructions send those filings, with the tax, to the Ogden Service Center. A transferee generally must file Form 8288 and transmit the tax by the 20th day after the date of transfer.

FIRPTA withholding is a prepayment of the seller’s U.S. tax. The foreign seller still files a U.S. return—often Form 1040-NR for an individual—and claims credit for the amount shown as withheld. That is why residency and filing-status questions still matter after closing; see our guide to tax residency vs. immigration status.

Exceptions, the $300,000 residence rule, and the 10% band up to $1 million

Section 1445(b) and the IRS exceptions page list several ways withholding can be reduced or eliminated. Common ones for residential closings include:

• Buyer residence ≤ $300,000. No withholding is required if the transferee acquires the property for use as a residence and the amount realized is not more than $300,000, provided the residence-use tests on the IRS exceptions page are met (including definite plans to reside at the property for at least 50% of the days it is used by any person during each of the first two 12-month periods after the transfer).
• Buyer residence up to $1,000,000. Under §1445(c)(4), if the property is acquired for use as a residence, the amount realized does not exceed $1,000,000, and the $300,000 exemption does not apply, the statute substitutes 10% for 15%.
• Seller’s non-foreign certification. A qualifying affidavit that the transferor is not a foreign person can turn withholding off, subject to the statute’s false-affidavit and agent-notice rules.
• Nonrecognition notices. When gain or loss is not recognized under a Code or treaty provision, the exceptions page requires a notice filed with the Ogden Service Center by the 20th day after the date of transfer.

Form 8288-B withholding certificates and the Ogden pipeline

When the expected U.S. tax is lower than the default withholding, the transferor or transferee (or an authorized person) can apply for an IRS withholding certificate on Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests. The IRS FIRPTA FAQ states that the IRS will normally act within 90 days of receiving all information needed for a proper determination.

That 90-day clock is why the FedWeek/OSC story matters at closing. Certificate applications sit in the same Ogden workflow the whistleblower flagged. Until a certificate issues or is denied, Form 8288 instructions generally still require withholding; remittance can wait until the 20th day after the IRS mails the certificate or a denial notice, unless the application’s principal purpose was delay. Calendar both the §1445 closing deadline and Form 8288-B follow-up—do not treat “certificate pending” as “no cash at risk.”

Joint foreign and U.S. owners

The IRS FAQ is blunt: you cannot allocate 100% of the amount realized to the U.S. spouse and 0% to the foreign spouse to avoid §1445. When one or more foreign persons and one or more U.S. persons jointly dispose of a U.S. real property interest, the amount realized is allocated among the transferors based on their capital contributions to the property. For this purpose, spouses are treated as having contributed 50% each. The buyer withholds on the total allocated to foreign transferors; foreign transferors then agree how to credit the withholding among themselves (request by the 10th day after the date of transfer under the IRS FAQ).

Preparer checklist after the OSC/TIGTA findings

• Identify foreign status early — before the purchase agreement locks in who must withhold and whether a Form 8288-B is worth filing.
• Compute amount realized correctly — cash, other property FMV, and liabilities; do not confuse it with taxable gain.
• Test residence exceptions — $300,000 exemption vs. 10% rate up to $1,000,000 vs. full 15%.
• File Forms 8288/8288-A on time — generally by the 20th day after transfer, to Ogden; keep Form 8288-A copies for the seller’s credit claim.
• Plan the seller’s return — withholding is not the final tax; match Form 8288-A credits on the foreign person’s U.S. return, and watch international guidance timing (see our note on retroactive tax regulations under §7805(b)).
• Do not ignore entity and state layers — partnership-interest sales can raise separate character and sourcing issues, as in our Section 751 / California nonresident sourcing piece.

Where Tax Brew fits

FIRPTA closings fail when residency, amount realized, Forms 8288/8288-A/8288-B and the seller’s return are treated as separate projects. Tax Brew provides bookkeeping, cleanup and tax prep support for US CPA firms, including international-sale workpapers and withholding checklists, with the first 20 hours free for qualifying engagements. Your firm keeps the advice and the sign-off. See our services, or email info@taxbrewglobal.com.

Sources: FedWeek (Oct. 13, 2026), OSC Credits IRS Whistleblower for Strengthened Oversight of Foreign-Owned Real Estate; IRS, FIRPTA Withholding; IRS, Exceptions from FIRPTA Withholding; Instructions for Form 8288; 26 U.S.C. §1445 (Cornell LII). General information, not tax or legal advice.