Withholding Tax |
HIGHTOWER REALTY Denis Le Marchant-Smith 407-922-3080 |
A part of these funds, representing 10% of the sale price, may be kept back as withholding tax if the seller is a foreign national. This is required by the IRS to ensure that all outstanding tax bills are paid before the seller is no longer within their jurisdication. This tax is either retained by the closing agent or sent to the IRS. When the IRS has established any residual tax liability of the seller the IRS will either refund the net amount withheld or issue instructions to the closing agent to refund the net amount. The process is quicker when funds are held by the title company, but this is only permitted when all appropriate documentation is filed before closing. The seller should consult with his CPA (accountant) as early as possible in the sale to make sure this is done, and both the seller's and the buyer's agents should make sure that the necessary information about their clients' status is made available promptly to assist in the prompt filing of the appropriate IRS forms. |
Quick Definitions Escrow account - a legally protected holding account into which a buyer's deposit will be retained until released at closing. Sellers disclosure - a standard form that allows the seller to provide the buyer with basic information about the home and its services. Title company - the title company acts in a legal capacity, checking on title, arranging title insurance, and coordinating closing and the distribution of funds. Home appraisal - this is an independent valuation of the home, required by the lender as the basis for the loan amount. Home inspection - this is carried out at the buyer's expense to identify any problems with the home that may need to be fixed before closing. Closing statement - also called a HUD1 statement, this is the financial balance sheet that forms the basis of the distribution of funds at closing. |