Many buyers rely on the personal residence exception to avoid FIRPTA withholding, but the IRS is clear: a signature alone does not protect you.
Here’s what you need to know:
A FIRPTA residential affidavit promises the buyer will use the property as a residence for the required period.
If the buyer does not follow through, for example sells within a year or does not occupy the property as stated, the exemption is invalid.
The buyer is liable for the withholding tax that should have been collected under IRC §1445(a).
Interest accrues on unpaid withholding (IRC §6601), and standard penalties for failing to withhold also apply (IRC §6651).
The IRS can identify noncompliance through:
• Buyer filings (Forms 8288/8288-A)
• Seller tax returns
• Third-party reports
Liability can be assessed retroactively.
There is no separate “affidavit penalty”. Noncompliance is treated as unpaid tax. Early resale or failing to live in the property does not eliminate liability.
Bottom line: FIRPTA waivers are conditional. The IRS expects buyers to honor their affidavit. Failure to do so triggers the same tax, interest, and penalties as failing to withhold in the first place, and the liability shifts entirely to the buyer. At that point, this is no longer the seller’s issue. It becomes the buyer’s tax debt, the buyer’s penalties, and the buyer’s problem.
Kat Rogers
🌍 Foreign Tax CPA
Professional CPA guidance for foreign owners of U.S. property and the professionals who serve them.
Phone: +1 (321) 784-8329
What’s App: +1 (941) 200-1040
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