The FIRPTA Form Must Include the Social Security Number (or TIN)

FIRPTA ThumbnailLately I have been given a lot of incomplete FIRPTAs from listing agents in & near Silicon Valley with the request (or demand) that my buyers sign them.  They explain “we don’t have to provide the social to the buyers anymore”.  These well intentioned agents have mixed up two choices and provided something of a hybrid that cannot be used to satisfy the requirement of the form. Hence this post.

It’s not just happening to me and to my buyers. There’s an immense amount of confusion about how to properly complete and handle the FIRPTA form in California real estate sales.  Most of it would be solved if people (buyers, sellers, realty agents, transaction coordinators and brokers) would simply read it and not assume what the requirements are.  (Silicon Valley Realtors have long heard local real estate trainer Guy Berry admonish us in class to simply read the forms.  He scrawls in large letters on the board for his class on the purchase agreement: What does the contract really say?)

So let’s do that.  Let’s see what the Seller’s Affidavit of Nonforeign Status And/Or California Withholding Exemption really says. To begin with, I uploaded the 2 page FIRPTA document onto my Valley of Hearts Delight website, so you can access the entire document by clicking on the link (it will download into a new window – it’s a pdf).  You might be surprised, especially if you are taking your information second-hand and have not read this form yourself in the last two years. (And if in doubt about any of it, please contact a real estate attorney for clarification.)

What is the purpose of the Seller’s Affidavit or FIRPTA?

Why do we have this form at all? The very first part of page one answers this question. (Words in red are mine.)

Internal Revenue Code (“IRC”) Section 1445 provides that a transferee (buyer) of U.S. real property interest must withhold tax if the transferor (seller) is a “foreign person”.  California Revenue and Taxation Code Section 18662 provides that a transferee (buyer) of a California real property interest must withhold tax unless an exemption applies.

So for starters, we are told that buyers must withhold tax from the sellers unless an exemption applies when they buy real estate in California. That’s what this FIRPTA form is all about: it tells the buyer that there is an exemption.  By completing this form and providing it, the seller is giving an affidavit that he or she is not subject to the withholding tax for either the Federal Government or for the State of California. The buyer is off the hook for holding money back in escrow from the seller. (more…)