Withholding Tax |
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HIGHTOWER REALTY Denis Le Marchant-Smith 407-922-3080 |
After closing, the seller receives the balance of funds as set out in the HUD1 Settlement Statement. 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. To do this, the seller has to provide the IRS with information about the buyer. If you are buying a property that is being sold by a foreign (non US citizen) owner, you will probably be asked by the seller's accountant to do one of the following: (1) provide your SS number if you are a US citizen. (2) provide your ITIN if you are not a citizen but already have an ITIN for a previous property. (3) complete documentation to apply to the IRS for an ITIN if this is your first US property. You will in any case need an ITIN when you file IRS tax returns, so this is a convenient (and free) way of getting one. The seller will pay his accountant for the work involved. |
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. |
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