Claiming Back Withholding Taxes for Canadians Selling US Real Estate
If you’re a Canadian citizen selling real estate in the United States, you may be subject to withholding taxes. These taxes can be as high
SDG Accountant Firm Helps Client Recover Foreign Investment in Real Property Tax Act (FIRPTA) Tax on Selling his Florida Rental Property
Client Background:
John Smith, a Canadian resident, owned a rental property in Florida for several years. Upon selling the property, he encountered FIRPTA tax implications, which required withholding a portion of the proceeds to satisfy potential U.S. tax liabilities.
Client's Needs:
John approached SDG Accountant seeking assistance with his tax obligations resulting from the sale of his rental property in Florida. He needed guidance on complying with FIRPTA tax requirements and optimizing his tax situation under the U.S.-Canada Tax Treaty.
SDG Accountant's Approach:
Sami Ghaith, CPA and founder of SDG Accountant, promptly assessed John’s situation and developed a tailored strategy to address his concerns. The firm’s expertise in cross-border taxation and familiarity with FIRPTA regulations enabled them to provide comprehensive assistance.
Related Read:
FIRPTA Tax Compliance:
Sami Ghaith ensured that John complied with FIRPTA tax requirements by accurately determining the appropriate withholding tax rate for the sale of his rental property in Florida. Understanding the intricacies of FIRPTA, SDG Accountant guided John through the process, ensuring compliance with U.S. tax laws.
Utilizing U.S.-Canada Tax Treaty:
Leveraging the provisions of the U.S.-Canada Tax Treaty, SDG Accountant optimized John’s tax situation by applying the correct withholding tax rate, thereby minimizing his tax liabilities while maintaining compliance with both U.S. and Canadian tax laws.
Expertise in FIRPTA Forms (Form 8288):
SDG Accountant’s proficiency in handling FIRPTA tax matters extended to the preparation and submission of required forms, including Form 8288, “U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests.” By accurately completing and filing Form 8288, the firm ensured compliance with FIRPTA regulations and streamlined the tax process for John. We worked directly with John’s withholding agent to remit the withholding tax to the IRS.
1040NR Filing and Refund Recovery:
As John’s trusted advisor, Sami Ghaith assisted him in preparing and filing Form 1040NR, the U.S. Nonresident Alien Income Tax Return. Recognizing John’s eligibility for a refund based on his tax rate and capital gains tax calculations, SDG Accountant facilitated the process to claim a $25,000 refund recovery on his behalf.
Related Read:
US Form 1040-NR Refund Recovery for Canadian Citizens
Form 1040-NR is often required for nonresident aliens who are engaged in a business or trade in the U.S. or otherwise generate income from sources
Outcome:
Thanks to SDG Accountant’s diligent efforts and expertise in FIRPTA tax matters, John successfully navigated the complexities of selling his Florida rental property and claimed his tax withholding on 1040NR. By complying with FIRPTA requirements, leveraging the U.S.-Canada Tax Treaty, and claiming eligible refunds, John achieved peace of mind knowing that his tax obligations were efficiently managed.
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Start My Tax PrepConclusion:
SDG Accountant remains committed to providing personalized and comprehensive tax solutions to clients facing cross-border tax challenges. With a focus on expertise, integrity, and client satisfaction, the firm continues to empower individuals like John to navigate complex tax landscapes with confidence and peace of mind.
The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situations.
— Sami Ghaith
CPA, CGA, MBA
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