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U.S Withholding Tax Return for Certain Dispositions by Foreign persons

Form 8288 is the go-to document for reporting and remitting withheld amounts from specific transactions and distributions governed by sections 1445 and 1446(f)(1). Additionally, it's utilized for reporting and remitting withholdings under section 1446(f)(4), as well as for claiming credits or refunds for withholdings under the same section for transfers made on or after January 1, 2023.

Section 1445: When a U.S. real property interest (USRPI) is acquired from a foreign person or when foreign and domestic corporations, qualified investment entities (QIEs), and the fiduciaries of certain trusts and estates make certain distributions;

Section 1446(f)(1): When a non-publicly traded partnership interest is transferred (including a distribution made concerning such interest) by a foreign person for a gain if the partnership is engaged in the conduct of a trade or business within the United States; or

Section 1446(f)(4): When a partnership makes a distribution to the transferee of a partnership interest that failed to withhold the required amount under section 1446(f)(1).


When not to use Forms 8288 and 8288-A

Instead of using Forms 8288 and 8288-A, utilize Forms 1042 and 1042-S to report and remit withheld amounts for any of the following scenarios.

  1. A distribution concerning gains from the disposition of a USRPI from a trust that is regularly traded on an established securities market is subject to section 1445 but is not reported on Forms 8288 and 8288-A.

  2. A dividend distribution by a qualified investment entity (QIE) to a nonresident alien or a foreign corporation that is attributable to gains from sales or exchanges of a USRPI by the QIE. However, a dividend distribution by a QIE is not subject to withholding under section 1445 as a gain from the sale or exchange of a USRPI if:

    1. The distribution is on stock regularly traded on a securities market in the United States, and

    2. The nonresident alien or foreign corporation did not own more than 10% (for dispositions and distributions before December 17, 2015, did not own more than 5% of such stock in the case of a real estate investment trust (REIT)) of that stock at any time during the 1 year ending on the date of the distribution.

      The dividend distribution, however, may be subject to withholding under sections 1441 or 1442.

  3. A distribution of effectively connected taxable income by a PTP that is subject to the withholding requirements of section 1446(a).

  4. The transfer of a PTP interest (including a distribution made concerning the PTP interest) is subject to withholding under section 1446(f)(1).


Who & When Must File Form 8288?

A buyer or another transferee of a U.S. Real Property Interest (USRPI) is obligated to complete and submit Part I of Form 8288 to report and remit the withheld amount. Corporations, Qualified Investment Entities (QIEs), or fiduciaries mandated to withhold tax under section 1445(e) must fill out and submit Part II of Form 8288 for the same purpose. In cases where there are multiple joint transferees, each is responsible for withholding. Nevertheless, if one of the joint transferees fulfills the withholding and remits the necessary sum to the IRS, it satisfies the requirement for all.

A transferee is required to file Form 8288 and remit the withheld tax to the IRS within 20 days following the transfer date.

Withholding is mandatory even if a withholding certificate application is pending with the IRS on the transfer date. Nonetheless, filing Form 8288 and remitting the withheld tax need not occur until the 20th day after the IRS issues the withholding certificate or denial notice. However, if the withholding certificate application was primarily submitted to defer the tax payment to the IRS, interest, and penalties will accrue from the 21st day post-transfer until the date of full payment.


Forms 8288-A Must Be Attached

Completing Form 8288 necessitates also completing Form 8288-A for each individual subject to withholding. Attach Copies A and B of Form 8288-A to Form 8288, while retaining Copy C for your records. It's possible to file multiple Forms 8288-A for a single transaction with just one Form 8288. There is no requirement to provide the transferor with copies of Form 8288 or 8288-A directly.

The IRS will endorse Copy B of each Form 8288-A and send the endorsed copy to the foreign person subject to withholding at the address listed on Form 8288-A. For the transferor to claim credit for the amount withheld, they must typically attach the endorsed Copy B of Form 8288-A to their U.S. income tax return (such as Form 1040-NR or 1120-F) or their application for an early refund submitted to the IRS.


What penalties are there?

Penalties are imposed under section 6651 for failing to file Form 8288 on time and for not paying the required withholding when due. Moreover, if one is obligated but fails to withhold tax under section 1445, the tax, along with interest, may be collected from them. Section 7202 stipulates that a penalty of up to $10,000 may be levied for the willful failure to collect and remit the tax. Additionally, corporate officers or other responsible individuals may face penalties under section 6672, which are equivalent to the amount that should have been withheld and remitted to the IRS.


We can assist you

At H&CO, our experienced team of tax professionals (CPAs) understands the complexities of FIRPTA and is dedicated to guiding you through the process. With excellent service and a personalized approach, we help you navigate U.S. and international income tax laws, staying up to date with the latest changes.

With offices in the US in Miami, Coral Gables, Aventura, Fort Lauderdale, Orlando, Melbourne, and Tampa as well as offices in over 29 countries, our CPAs and International Tax Advisors are readily available to assist you with all your income tax planning, tax preparation and IRS representation needs. To learn more about our accounting firm services take a look at our individual tax services, business tax services, international tax services, expatriate tax services, SAP Business One, entity management, human capital, and audit and assurance services. 

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