USA house sale - being stung by FIRPTA

skipmai

We bought a house in Florida back in 2005 and sold it in January 2020. This was lucky in that it was just before Covid hit but not so much as we still never made back even what we paid for it.  This was going to be our pension but we just could not afford to keep the house on. However, our main concern is that we still do not have the bulk of the funds returned to us as under FIRPTA, the US government decided to hold 15% of the sale value. Our equity in the house after paying a hefty deposit and 15 years of mortgage meant we would only take back about 20% of the sale value. We received the 5% on completion but we still don't have the other 15%.  Every time we ask our tax representatives in the US, they just say everything is a mess over there because of Covid and things are taking longer than normal. All the correct paperwork is in, we have been told there is no tax due but they still won't release our cash.  Does anyone know if we can do anything about this at all or are we destined to just wait it out until the IRS decide to release our money?  Thanks for any advise or please just use as a warning before investing in US property!

user1977

This is a UK-based forum, you'd be better asking somewhere which knows about US tax affairs.

skipmai

Thanks, I appreciate that however, we already know the US view but I was hoping someone else from the UK might have some experience of this. Also UK people have posted questions on issues connected with US house sales so that prompted me. As I said, this might also prompt a UK person not to fall into the same trap as us.  It is a huge issue which was not occurring at the time we purchased.  A UK expert on the matter might be more helpful in regard to any recourse we might have as the Americans certainly wont tell us. 

AdrianC

But this is entirely a US tax question...

You've sold a US property, so the US taxman is after you for the US taxes due on the sale of that property.

There may be UK CGT to pay when you bring the money back into the country, but the US taxes paid would offset against those.

Thrugelmir

skipmai said:

  A UK expert on the matter might be more helpful in regard to any recourse we might have as the Americans certainly wont tell us. 

Probably just a question of following due process. Te pandemic obviously will have impacted the workings of the IRS just as it has to many organisations in the UK.  A quick read suggested that refunds can take up to 18 months even in normal circumstances. Depending when in the US tax year the property is sold. The 15% deduction is a mandatory one and is used to ensure that all due US taxes are paid.  Unlike the UK there's no opportunity to leave unpaid debts behind. 

user1977

skipmai said:

Thanks, I appreciate that however, we already know the US view but I was hoping someone else from the UK might have some experience of this. Also UK people have posted questions on issues connected with US house sales so that prompted me. As I said, this might also prompt a UK person not to fall into the same trap as us.  It is a huge issue which was not occurring at the time we purchased.  A UK expert on the matter might be more helpful in regard to any recourse we might have as the Americans certainly wont tell us. 

Sure, somebody here might know, but I don't see any UK-specific angle to the question.

skipmai

Adrian C - the tax man is not "after us" either US or UK -if you read my post it says they have confirmed we owe nothing. They are just withholding the funds until they are good and ready. We do not owe CGT either.

user1977 - as I said the UK- even if no UK person has found a way of speeding things up, the specific UK angle is just a cautionary tale to those who might be considering buying or selling in the US (we were not told).

Thanks all for input anyway.

AdrianC

skipmai said:

We do not owe CGT either.

Ah, sorry, I missed that you'd sold it for less than you paid.

SuperHan

AdrianC said:

skipmai said:

We do not owe CGT either.

Ah, sorry, I missed that you'd sold it for less than you paid.

That doesn't necessarily mean no CGT, as there can be CGT on the forex gain if the £ equivalent is higher than the £ purchase price, even if it's a $ loss.