According to IRS.gov, the withholding amount on the sale of US property can be adjusted if the IRS issues a withholding certificate. A withholding certificate is an application for a reduced withholding based on the gain of a sale instead of the selling price.
If 15% of the selling price is more than the tax you will owe on this sale, then a withholding certificate may be ideal for you.
Important features to know about withholding certificate applications:
- If the withholding certificate can’t be applied for and issued prior to closing, then typically the buyer gets to decide if the funds need to be remitted within 20 days of the closing or if they can remain in escrow pending the approval or rejection of the application.
- The IRS will generally act on these requests within 90 days after receipt of a complete application
- All parties must have or at least apply for a US tax ID for a withholding certificate
- The applicant must be able to prove their basis in the property
- The transferee, the transferee’s agent, or the transferor may request a withholding certificate.
- A transferor that applies for a withholding certificate must notify the transferee in writing that the certificate has been applied for on the day of or the day prior to the transfer.
Let us help you start your application today!