Thomas C. Roberge & Company

SOCIAL SECURITY NUMBERS, TAX ID NUMBERS

AND THE 10% FIRPTA WITHHOLDING

May 16, 2007

St. Petersburg and Sarasota

Telephone: (727) 822-9393

This newsletter discusses the 10% withholding issue for foreign sellers who hold social security numbers or Individual Taxpayer Identification Numbers (commonly referred to as ITIN’s or tax ID numbers).

Each week we receive several phone calls asking if the 10% FIRPTA withholding is applicable if the seller holds a social security number or ITIN. We have addressed this topic before and need to keep re-emphasizing it to our readers since many of you do not deal with foreign related transactions on a regular basis.

The 10% withholding applies to a foreign seller regardless of the fact that they hold a valid U.S. social security or tax ID number. The law only looks at one fact – you have a foreign seller disposing of U.S. real estate. The IRS wants the 10% withheld as an estimated tax payment so the foreign seller files a U.S. income tax return and pays his or her share of the tax liability on the sale. If the tax is less the seller will obtain a refund if they follow certain procedures. There are several relief measures available too. Call us for information.

Most of the time it is obvious as to whether the seller is a U.S. or foreign person. However, at times this is not always clear. For example, the seller may be a non-U.S. citizen and hold a work or other visa that allows them to temporarily reside in the U.S. They may or may not be a “U.S. person” for purposes of avoiding the 10% withholding tax – depending on the facts in their situation. Call us when you are faced with this situation so we can walk you through the facts to arrive at the correct answer. Believe it or not, there are over 50 pages of compressed print in the IRS final regulations defining a U.S. and foreign person. These rules are not always logical. However, we have extensive experience in working with these rules and usually can arrive at the correct answer and treatment with only a few questions.

It is easy to get upset when faced with the 10%. Many will try and rationalize their way around the law with this tax ID number argument. However, just remember that the law is only looking at one fact – you have a foreign seller disposing of U.S. real estate and the IRS wants to ensure that the foreign seller pays the same tax that a U.S. person would pay in similar circumstances. Also, there are no tax treaties with any country that avoid the 10% withholding requirement.

Please contact us at (727) 822-9393 or (941) 952-5848 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.