NEW RULES FOR

U.S. TAX IDENTIFICATION NUMBERS
 

August 28, 2006

Thomas C. Roberge & Company

St. Petersburg and Sarasota

Telephone: (727) 822-9393
Contact: TRoberge@RobergeCo.com
 
Copyright, 2006, Thomas C. Roberge & Company
All Rights Reserved
 
 

The U.S. tax authorities have just changed the procedures for issuing U.S. tax identification numbers (also known as ITIN's (Individual Taxpayer Identification Numbers)) and processing payments for the 10 percent estimated tax withholding on U.S. real estate sales.

This newsletter discusses these changes and explains what to do now so you are not adversely impacted.

The changes 

The U.S. tax authorities are presently moving the administration and processing applications for U.S. tax identification numbers, processing payments for the 10 percent estimated tax withholding on U.S. real estate sales, processing of applications for relief from the 10 percent withholding, and processing of U.S. income tax returns for non-U.S. persons from the Philadelphia Service Center to service centers in two other states.

The Philadelphia Service Center has administered the tax system for foreign nationals for many, many years.  We were fortunate to have several personnel there who were very experienced and knowledgeable in international tax matters.  Initial conversations with the personnel at the two new service centers have been encouraging.  However, due diligence will be needed to follow the new procedures to ensure the system works efficiently and that foreign nationals estimated tax withholding payments and refunds due are handled properly.  It is this latter issue where we have strong concerns.

Foreign sellers will need to have a U.S. tax identification number when they sell U.S. real estate.  Although this number is not required to complete a real estate sale, there will, in likelihood, be problems locating this payment under the new system if the payment is sent without the seller's tax identification number.  If this happens then the foreign  seller will probably have extreme difficulty obtaining any refund due.

What we can do

Our firm is a licensed Certified Acceptance Agent with the Internal Revenue Service.  We have the ability to process applications for tax identification numbers, review the documentation required and file the application without the need to submit valuable, original documents such as passports, which can be lost by government officials.

There are numerous ways to obtain a U.S. tax identification number well before the property is sold and the estimated tax is remitted to the U.S. government.  You do not have to have a real estate sale or file a U.S. income tax return to obtain this number.  As a Certifying Acceptance Agent we can utilize these strategies so the number is available when the foreign seller completes his or her real estate sale and the 10 percent is sent to the government.

If the sale is completed and the 10 percent is sent in with the foreign seller's tax identification number, the funds are credited to the seller's account, thereby making tracking of the payment against the seller's U.S. tax liability for the year of sale considerably easier.  Also, this will facilitate the issuance of a refund if the seller is due one once the tax return is filed.

If the sale is completed and the 10 percent is sent to the government without the seller's tax identification number the tax is placed in a general account of the government without credit being given to the seller.  There is much likelihood that there will be considerable difficulty in having this payment credited to the seller's tax account with the IRS.

What you should do

Contact us at (727) 822-9393 at the earliest possible moment (preferably when the real estate is listed for sale) for details on obtaining this number.  We can handle applications by email, telephone and fax if you are not in the U.S.  You do not want these new procedures to negatively impact you - especially when you are trying to obtain a refund of the over withholding.