Thomas C. Roberge & Company

REPORTING PROCEDURES FOR

CLOSING AGENTS AND RENTAL AGENTS

WHEN A FOREIGN SELLER OR FOREIGN LANDLORD

DOES NOT FURNISH A TAX I.D. NUMBER

February 5, 2007

Thomas C. Roberge & Company

St. Petersburg and Sarasota

Telephone: (727) 822-9393

Contact: Troberge@RobergeCo.com

Lately, we have received numerous requests from closing agents and rental agents on how to report real estate sales and rentals to the IRS on Forms 1099-S and 1042-S when the foreign property owner does not have or will not provide a U.S. tax identification number to the agent.

The reason for this question is that the IRS has indicated that they will assess penalties when this information is not provided on these forms. Accordingly, the closing agent normally obtains this number on Form W-8BEN and the rental agent obtains it on Form W-8ECI from the foreign property owner. Furthermore, the rental agent is required by law to withhold 30% of gross rents they collect on behalf of the foreign owner until they receive such number on a fully executed form W-8ECI.

You should request an ID number from your foreign client in writing. The document should state that the identifying number is required to be furnished under U.S. tax law. Keep this signed document in your client’s file.

When you send the 1099-S or 1042-S forms to the IRS, attach a signed affidavit (no special format is prescribed) to the form transmitting the Forms 1099-S or 1042-S, listing the names of all aliens from whom the withholding agent requested tax ID numbers and was not able to secure such.

An additional problem to rental agents is when they report rents collected on behalf of foreign owners without tax ID numbers and do not show the 30% withholding tax as being collected and paid to the IRS. In this situation the rental agent will be held liable for the 30% withholding tax, plus penalty and interest.

The Internal Revenue Service has recently reorganized the processing and administering of many of its services involving foreign taxpayers. Feel free to contact us at (727) 822-9393 if you have questions.

Internal Revenue Service Circular 230 Disclosure – You are hereby advised that any tax advice contained in this newsletter is not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or to support the marketing of any tax transactions or matters addressed herein.