How the FIRPTA Withholding Process Works During a DVC Closing
If you are a non-US person selling a DVC contract, the FIRPTA withholding process is built into your closing. You don't have to do anything special to trigger it. The closing agent handles the mechanics. But understanding what happens and when helps you plan financially and avoid surprises.
Before Closing: What the Closing Agent Does
When the title company or closing agent is assigned to your DVC sale, one of the first things they check is whether the seller is a US person or a foreign person. They'll ask you to complete a seller's affidavit or certification form that includes a question about your citizenship and residency status.
If you indicate that you are not a US citizen or US resident, the closing agent knows FIRPTA applies. They'll calculate the withholding amount (15% of the gross sale price) and build it into the closing statement.
At Closing: How the Money Flows
On the closing statement, the FIRPTA withholding appears as a line item deduction from the seller's proceeds. Here is what a typical closing statement looks like for a $25,000 DVC sale by a non-US seller:
| Item | Amount |
|---|---|
| Sale Price | $25,000 |
| Less: Broker Commission (6.9%) | -$1,725 |
| Less: Estoppel Fee | -$150 |
| Less: Seller Closing Costs | -$350 |
| Less: FIRPTA Withholding (15%) | -$3,750 |
| Net to Seller | $19,025 |
The $3,750 doesn't go to the buyer. It goes to the IRS. The closing agent is personally liable for collecting and remitting the withholding. If they fail to withhold, the IRS can come after the closing agent and the buyer for the amount that should have been withheld.
After Closing: Forms Filed
Within 20 days of closing, the closing agent files Form 8288 with the IRS along with the $3,750 payment. They also file Form 8288-A, which is the withholding certificate documenting the transaction details.
The IRS processes these forms and mails a stamped copy of Form 8288-A to you (the seller) at the address on file. This stamped copy is your receipt. You'll need it when you file your 1040-NR to prove how much was withheld.
The stamped 8288-A can take 2-3 months to arrive. If you haven't received it by then, you can file your 1040-NR using the unstamped copy from the closing agent, but the stamped version is preferred.
What You Need to Do
During the closing process, your only obligation is to honestly disclose your non-US status. After that, the closing agent handles the withholding mechanics. But you should:
- Review the closing statement to confirm the FIRPTA withholding amount is correct (15% of sale price)
- Get copies of Form 8288 and Form 8288-A from the closing agent
- Keep your original purchase documents for your cost basis calculation
- File your 1040-NR after the tax year ends to claim your refund
What If the Closing Agent Doesn't Withhold?
This shouldn't happen, but if for some reason the closing agent fails to withhold FIRPTA, the buyer becomes liable. The IRS can pursue the buyer for the withholding amount. This is why reputable closing agents always follow FIRPTA procedures precisely. They don't want the liability, and neither does the buyer.
The bottom line: the closing process for a non-US DVC seller is the same as for a US seller, with one extra step. 15% gets set aside for the IRS. You get the rest. Then you file your tax return and get most of that 15% back as a refund. The process works. Just follow through on the filing.
