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How to Complete IRS Form 8288

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The Internal Revenue Services has introduced reformed rules for filling the forms. The IRS usually revises the rules during first quarter every year. In order to meet all the requirements imposed by the IRS, it is necessary to understand the utility of all tax forms as well as filling the forms completely. The form 8288 is one of the most misunderstood tax forms. Before proceeding to the answer of question that how to complete form 8288, let’s first understand the uses of form 8288. By understanding the concept and usability of Form 8288, you will become able to fill the form completely, even without the help of a lawyer. This guide will provide you a complete understanding on how to complete form 8288.

If you need help completing IRS form 8288, please call us at 407-344-1012, or email us at info@freedomtaxfl.com.

What is Form 8288?

In USA, people who want to report or pay taxes on their real estate properties can use two forms. The first one is Form 8288 and the second one is Form 8288-A. The IRS has Form 8288-B also. We will discuss its uses later in this article about how to complete form 8288.

Form 8288 A operates under section 1445 of the IRS Tax Obligations. Under this obligation, the US government obtains property taxes from foreign people who own real estate properties inside US. This obligation also applies on domestic corporations, foreign corporations, fiduciary of estates and trusts, and qualified investment entities. This form can also be used when a foreign person wants to pay the withholding taxes on real estate properties in US.

Form 8288-A is used by the buyers and transferees. They can report the disposed real estate properties in US to calculate withheld taxes. Sometimes, people want to know how to complete form 8288 and who files these forms. let’s have a look.

Who Files Form 8288?

According to the Section 1445, a corporation, a qualified entity, a fiduciary trust, or a real estate interest business is obliged to submit Form 8288 to mention the withheld taxes. Sometimes, more than one person owns a property. In this case, both parties are obliged to submit Form 8288. The obligation of the parties will be calculated and met if one of the parties transmits the withheld amount.

What is Amount to Withhold?

The amount to withhold is a fundamental part of the guide about how to complete form 8288. The amount to withhold has been changed by the IRS, effective from February. The IRs calculates the amount on transferor’s disposition. The taxpayer is obliged to pay 15% of the amount as amount to withhold. However, the calculations effective from February 17, 2016 provide a flexibility of 5%. The taxpayer is required to pay only 10% of the amount to withhold.

If you want to get further information about the 35% amount to withhold then visit the IRS official website and search Entities Subject to Section 1445 (e). If you want to learn more about amount to withhold lesser than 35% then search Purchase of Residence for $1,000,000 or Less on the IRS official website.

If you need help completing IRS form 8288, please call us at 407-344-1012, or email us at info@freedomtaxfl.com.

Condition: Joint Transferors

The understanding of how to complete form 8288 is equally important for joint transferors. The determination of amount to withhold in joint transferor condition is subject to difference in the contribution. If more than one foreigners transfer the interest for a real estate property in US, the amount to withhold will be calculated in the following way.

Allocate the capital contribution. Then allocate the amount on capital contribution. If the transferors are spouses, the amount for each candidate will be considered 50%.

Amount to withhold on the total amount/capital

The foreign transferors will mutually agree for the allocation of a capital. After that, the transferors will agree to accept ad request the IRS that the withholding amount will be credited after 10th day of transfer. Sometimes, the transferors fail to reach an agreement. In such a case, the IRS will allocate equal amount to each of the transferor or capital holder. This is applicable on joint transferors and transferees. This guide on how to complete form 8288 will provide you definitions of these entities later.

When Form 8288 and Form 8288-A are impracticable

In certain circumstances, Form 8288 and Form 8288-A are impracticable. Here, in this guide on how to complete form 8288 we will have a look on these circumstances. It is highly important to understand when the forms should not be distributed as a wrong submission may lead to a penalty.

When a public trading corporation is operating in acquired real estate property, the connected income of foreign capital holders will be calculated under section 1446 instead of 1445.

If a trust establishes on securities market, then technically it should be filed under section 1445. However, this case will be filed under Statement of Withholding on Disposition by Foreign Persons of US Real Property Interests.

Important Terminologies Involved in the Process

The process of How to complete form 8288 requires extensive understanding of the terminologies. Remember that if you do not understand the terms, you may end up filing wrong quotations in the sections and face a penalty. We will discuss the penalties later on.

Transferor

A transferor is a foreigner who disposes a real estate property in US by interest, purchase, gift, sale, or exchange. A transferor is a person who is considered as a disregarded entity in purpose of federal taxes for owning the assets.

Transferee

A transferee is a foreign person who buys, exchanges or receives a US real estate property as a gift. Simply put, the transferor is the seller and the transferee is the buyer. It is equally important for transferees to understand how to complete form 8288 as it is for the transferors.

Withholding Agent

The transferee usually receives the interest from a transferor or another foreign person. In this case the transferee is the withholding agent. However, if some other person receives the interest then the third person would be the withholding agent.

Qualified Substitute

The person who closes a transaction on behalf of transferor agent and transferee agent is called the Qualified Substitute.

Foreign Person

A foreign individual or a foreign organization is treated as a foreign person in the form 8288. When you research about how to complete form 8288 or fill it, you will see the term Foreign Person at certain places. Do not consider this term as an individual only. If you are operating as a joint corporation or sole proprietorship in US then foreign person refers to your organization.

If you need help completing IRS form 8288, please call us at 407-344-1012, or email us at info@freedomtaxfl.com.

How to Complete Form 8288

In this section, we will discuss about the process and technique of filling a tax form in US. This section contains two parts. In the second part, we will discuss about the process of filling Form 8288, specifically.

Part 1

You cannot fill out a form without understanding its appropriate process. Many times, people hire accounting professionals and lawyers in US to fill their tax forms, which is undoubtedly a wise approach to avoid the penalties. However, you can also save money along with avoiding these penalties simply by evaluating the process of filling tax forms.

  1. The first step is to determine your tax status. If you are operating as a joint corporation in US then you need to request your partners to fill the form 8288 for interests. If you are operating as an individual owner then you may proceed. An ideal approach is to arrange a meeting with your partners and discuss about the division of interest. It is important to make sure that you are not deprived of your due profits when the interests are distributed. Remember that if you fail to establish consent upon one agreement, the authorities will distribute the interest equally among all parties. Now, if your capital investment was more than the equal share of interest, you will receive lesser amount in interest profits.
  2. The second step is to determine the form, which you need to file. We have provided detailed understanding of the form 8288, 8288-A and 8288-B. Sometimes, you need to submit a copy of Form 8288-A along with the Form 8288.
  3. Finally, find a lawyer or accounting professional who offers free consultation services. You can get in touch with the lawyer to evaluate more about your status and form requirement. Many times, the lawyers guide their clients about which form they need to submit, only when the client seems well-versed with the process. This is what you have to prove there. Your role in the process of how to complete form 8288 as a transferee completes here.

Part 2

In this part, we will discuss about the process of completely filling the form 8288. Generally, form 8288 comes in one-page only. However, you may need to attach a copy of Form 8288-A with the form 8288.

If you are wondering about how to complete form 8288 then here we have provided a classification of its parts. The form 8288 consists of two parts. The first part is to be filled by the buyer or transferee under Section 1445 (a). As we have mentioned earlier, a transferee is the buyer or person who receives the property in exchange or gift, or the one who buys a property.

First Part

  1. In the first part you will write your full name in block letters. Sometimes, more than one or two persons buy the property. All transferees will receive their individual forms 8288 and fill them. All transferees will mention their names in this section and write their ITINs in front of the forms. According to 2003 revised tax laws, the IRS allows individuals to submit their forms 8288 without ITIN. However, you will need an individual identity from the IRS to fill this form, if you do not have the ITIN.
  2. In the second section, you will write the individual address and the street number. Do not write the PO Box number in this part.
  3. In the third part, you will write the individual city, town, province, state, and country name. Make sure to write your personal addresses and not of the company. This is important because sometimes, the transferees are from different cities, and sometimes they are from different countries. You can also write your phone number for quick access in the box given in the front of address bar. However, phone number is not compulsory to give.
  4. In the fourth section, you will write describe the location of the property, which you have acquired, purchased, or received as a gift or exchanged. Make sure to provide a descriptive explanation of the property’s location. Avoid writing the exact address of the property here however, you may explain the street location.
  5. The next section on how to complete form 8288 contains boxes for Date of Transfer. Fill the next box if you have attached Form 8288-A with the form. If you have attached more than one form 8288-A with the form 8288, then make sure to mention the correct number of forms attached. Write down the amount or capital realized at the time of transfer. If you are more than one transferees then you may communicate with each other to write the amount realized at the time of transfer. It will help you to avoid any figurative complication in future.
  6. The next section contains the amount withheld. Make sure to check the correct boxes. You may contact an accounting professional to calculate the withholding amount. Make sure to communicate with other transferees before checking the boxes.
  7. Finally, you will write the amount withheld in the box with number 7. The first part of how to complete form 8288 completes here. Now we will proceed to the second step.

Second Part

The transferee will not fill the second part. Instead, the Entity Subject to the Provisions of Section 1445(e) will fill this part. We have explained this entity earlier in the article. For further information, you can visit the official website of IRS or consult an accounting professional.

The second part contains similar information as is required in the first part. You job completed after signing the form and entering the date.

The last boxes in the form contain information of the preparer. This is useful if you have filled the form using foreign aid like an accounting officer or an agent. The agent will fill their personal information in the Preparer’s section. If you have prepared the form yourself, then you will enter your personal information here.

What is Late Notice of False Certification

The topic how to complete form 8288 is certainly incomplete without discussing the Notice of False Certification. Sometimes, the agent, or qualified substitute, or transferor’s agent send the notice to transferee that the address or any other information given in the form is false. In this case, you will not withhold the amount if you have not received any notification yet. However, if you have received the notification then you become obliged to hold the amount. You will become obliged to pay the entire amount until the IRS receives at least 15% of the withheld amount.

What is Late Notice of false Statement

The Late Notice of false Statement is issued after you understand how to complete form 8288, submit it and pay the dues. The Late Notice of false Statement is sent after the transfer. It occurs when one of the capital submitters do not enter the claimed withheld amount. Generally, withholding is not needed in this case. However, if the foreign corporation entered their capital and other information to be treated under section 897 (i) i.e. as a domestic corporation then the receiver of Late Notice of False Statement becomes obliged to withhold the amount.

Essential Tips

Following are some essential tips required for the process of how to complete form 8288.

  1. It is essential for the transferees to fill the form 8288 and the form 8288-A for the submission of interests. However, it is not essential for the transferors to fill both forms, except some circumstances. The transferors must obtain essential information from the authority.
  2. Form 8288 is also used to submit Form 8288-A and Form 8288-B. If anyone of these forms apply on you, make sure to attach them with Form 8288.
  3. If you submit your withholding taxes with Form 8288-B under Application for Withholding Certificate for Dispositions by Foreign Persons of US Real Property Interest then the application will considered pending until the date of transfer. You do not need to report or pay the withheld taxes but you need to submit the application for legal proceedings. This is an essential part of the process of how to complete form 8288.

Now that you understand the process of how to complete form 8288, you may fill your own form. However, the accounting professionals and lawyers are always there for your help. The IRS also helps the individuals who are unable to understand the process of how to complete form 8288. If you are the one then make sure to get in touch with the IRS for answers of your queries.

If you need help completing IRS form 8288, please call us at 407-344-1012, or email us at info@freedomtaxfl.com.

Robert AcevedoHow to Complete IRS Form 8288

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