Urgent - FIRPTA Nightmare - Title company won't write check to IRS
Hi everyone,
I'm a Canadian who has recently sold a vacation home in Florida. Since I'm not a US resident, it was agreed that the title company would withhold 15% of the sales proceeds, and I would pay for prepping FIRPTA forms and remittance.
I hired a large accounting firm that specializes in FIRPTA and put them in touch with the title company before closing. They got all the necessary info about the sale and the buyer, prepped all the documents, etc. The sale closed, and title said they would soon mail a check to the accounting firm. So far so good.
More than a week later, the accountant called and informed me that the title company had sent an incorrect check- it had the accounting firm's name, rather than payable to the IRS. They sent the check back, and requested that it be corrected.
This is where things became confusing:
The title company answered a couple days later that they could not cut a check to the IRS, and that the accounting firm was supposed to cash the check and write another to the IRS themselves. The accountant told me that not only could he not do so, but that this was illegal and he had never seen this from a title company before. To get a second opinion, I reached out to a different firm, explained the situation, and they gave me the same answer.
The title company gave me the contact of a firm they partner with, and requested that we use them instead as they meet their requirements, but they could not provide any explanation of why they can't write the check to the IRS, and I have already paid for the other firm's services and do not want to pay again. Plus, the fact that my firm said this might be illegal has made me wary of working with them.
It's now been 17 days since the sale, we're three days away from the deadline, the email thread with all parties keeps getting longer, but the situation is still not resolved. I'm talking to a real estate lawyer tomorrow for some guidance, but in the meantime I'd really appreciate any advice about this situation, as I'm completely confused about what to do here. Is there a legitimate reason for what the title company is doing? Do I cut my losses and agree to work with their partner? Is there any risk for me in doing so (e.g is it indeed illegal or sketchy to do what they're doing?)
Any guidance here is much appreciated. Thank you!
#2 All Forums Contributor
- Investor
- Virginia
Quote from @Sandra Kim:
Hi everyone,
I'm a Canadian who has recently sold a vacation home in Florida. Since I'm not a US resident, it was agreed that the title company would withhold 15% of the sales proceeds, and I would pay for prepping FIRPTA forms and remittance.
I hired a large accounting firm that specializes in FIRPTA and put them in touch with the title company before closing. They got all the necessary info about the sale and the buyer, prepped all the documents, etc. The sale closed, and title said they would soon mail a check to the accounting firm. So far so good.
More than a week later, the accountant called and informed me that the title company had sent an incorrect check- it had the accounting firm's name, rather than payable to the IRS. They sent the check back, and requested that it be corrected.
This is where things became confusing:
The title company answered a couple days later that they could not cut a check to the IRS, and that the accounting firm was supposed to cash the check and write another to the IRS themselves. The accountant told me that not only could he not do so, but that this was illegal and he had never seen this from a title company before. To get a second opinion, I reached out to a different firm, explained the situation, and they gave me the same answer.
The title company gave me the contact of a firm they partner with, and requested that we use them instead as they meet their requirements, but they could not provide any explanation of why they can't write the check to the IRS, and I have already paid for the other firm's services and do not want to pay again. Plus, the fact that my firm said this might be illegal has made me wary of working with them.
It's now been 17 days since the sale, we're three days away from the deadline, the email thread with all parties keeps getting longer, but the situation is still not resolved. I'm talking to a real estate lawyer tomorrow for some guidance, but in the meantime I'd really appreciate any advice about this situation, as I'm completely confused about what to do here. Is there a legitimate reason for what the title company is doing? Do I cut my losses and agree to work with their partner? Is there any risk for me in doing so (e.g is it indeed illegal or sketchy to do what they're doing?)
Any guidance here is much appreciated. Thank you!
Get all the parties on a conference call.
Quote from @Chris Seveney:I tried, and believe it or not, title company flat out refused to join a conference call with the accounting firm.
Quote from @Sandra Kim:
Hi everyone,
I'm a Canadian who has recently sold a vacation home in Florida. Since I'm not a US resident, it was agreed that the title company would withhold 15% of the sales proceeds, and I would pay for prepping FIRPTA forms and remittance.
I hired a large accounting firm that specializes in FIRPTA and put them in touch with the title company before closing. They got all the necessary info about the sale and the buyer, prepped all the documents, etc. The sale closed, and title said they would soon mail a check to the accounting firm. So far so good.
More than a week later, the accountant called and informed me that the title company had sent an incorrect check- it had the accounting firm's name, rather than payable to the IRS. They sent the check back, and requested that it be corrected.
This is where things became confusing:
The title company answered a couple days later that they could not cut a check to the IRS, and that the accounting firm was supposed to cash the check and write another to the IRS themselves. The accountant told me that not only could he not do so, but that this was illegal and he had never seen this from a title company before. To get a second opinion, I reached out to a different firm, explained the situation, and they gave me the same answer.
The title company gave me the contact of a firm they partner with, and requested that we use them instead as they meet their requirements, but they could not provide any explanation of why they can't write the check to the IRS, and I have already paid for the other firm's services and do not want to pay again. Plus, the fact that my firm said this might be illegal has made me wary of working with them.
It's now been 17 days since the sale, we're three days away from the deadline, the email thread with all parties keeps getting longer, but the situation is still not resolved. I'm talking to a real estate lawyer tomorrow for some guidance, but in the meantime I'd really appreciate any advice about this situation, as I'm completely confused about what to do here. Is there a legitimate reason for what the title company is doing? Do I cut my losses and agree to work with their partner? Is there any risk for me in doing so (e.g is it indeed illegal or sketchy to do what they're doing?)
Any guidance here is much appreciated. Thank you!Get all the parties on a conference call.
@Sandra Kim
The withholding agent (I’m assuming the title company in your case) generally should be remitting the withholding tax directly to the IRS out of the sales proceeds. The party with custody of the funds has the legal obligation to do this under the tax law if they hold the sales proceeds. They actually can have liability if they don’t withhold. Accounting firms typically have nothing to do with this process unless somehow the title company subcontracted the preparation of the 8288 to them (which really isn’t necessary as it doesn’t require tax expertise, only familiarity with the FIRPTA procedures in general, which any title co who’s worked with a sale by a foreign person would likely know).
This is indeed a weird situation and it definitely is unsupported by any authority in the code and regulations to send the withholding tax amount to an accounting firm acting as a middle man for the IRS unless they somehow expressly made an agreement to do so.
Good luck with that
Sandra, hi. Ask the accounting firm to cash the check and give the money to you. They might not comply, but give it a try. It is not illegal to cash a check issued to your name, in the case of the accounting firm. It is also very odd the title company issued a check to the accounting firm instead of the IRS.
-
CPA Florida (#ACC44844)
- FAS CPA & Consultants
Quote from @Charles D.:
@Sandra Kim
The withholding agent (I’m assuming the title company in your case) generally should be remitting the withholding tax directly to the IRS out of the sales proceeds. The party with custody of the funds has the legal obligation to do this under the tax law if they hold the sales proceeds. They actually can have liability if they don’t withhold. Accounting firms typically have nothing to do with this process unless somehow the title company subcontracted the preparation of the 8288 to them (which really isn’t necessary as it doesn’t require tax expertise, only familiarity with the FIRPTA procedures in general, which any title co who’s worked with a sale by a foreign person would likely know).
This is indeed a weird situation and it definitely is unsupported by any authority in the code and regulations to send the withholding tax amount to an accounting firm acting as a middle man for the IRS unless they somehow expressly made an agreement to do so.
Good luck with that
Thank you Charles. This is exactly what everyone has been telling me, that this is a simple process that all title companies are familiar with. The only reason I can think of, is that they have some sort of deal with this middleman, and stand out to make a commission out of this.
Quote from @Fulton Abraham Sanchez:
Sandra, hi. Ask the accounting firm to cash the check and give the money to you. They might not comply, but give it a try. It is not illegal to cash a check issued to your name, in the case of the accounting firm. It is also very odd the title company issued a check to the accounting firm instead of the IRS.
Hi Fulton, they did not feel comfortable cashing the check, which I understand. It is odd, and unfortunately tomorrow is the last day to file and I don't see the situation being resolved.