Opened in 2014 by a California tax attorney Michael W. Brooks, Domestic and International Real Estate Closing Tax Services (“DIRECTS”) is a tax preparation firm based in Palm Desert, California, focusing exclusively on the taxes owed by non-US persons and entities who sell or rent US real estate. Both the IRS and the State of California (and many other states) require foreign persons and entities (“foreign parties”) selling or renting real estate to pay an amount directly into the IRS and the State at the time of sale or payment of rent. These required “up front” payments to the IRS/California at the time of sale or payment of rent are referred to as “withholding taxes”, but they are probably better thought of as security deposits. At time of real estate sale, the IRS and California do not know if the foreign party owes any taxes (a tax will likely be owed if the foreign party sold or rented the U.S. real estate for a profit). But if the foreign party does owe a tax, the IRS and the State do not want to be in the position of having to collect it from a foreign party living in a foreign country (the IRS would argue they have enough trouble collecting taxes from Americans in the U.S., how can they enforce collections of French citizens living in France?). Foreign sellers of US Real Estate can apply for withholding certificates (IRS Form 8288-B) to obtain a release of the withholding tax (generally within 3 months of the sale), or wait well into the next calendar year to obtain a refund. 8288-B’s are an extremely valuable tool for foreign parties to receive their excess taxes back quickly. We also help foreign owners of US real estate who rent out the US real estate, and the property managers who oversee the US real estate, comply with the required US tax rules.
At DIRECTS, helping foreign parties (and escrow companies, realtors and property managers with foreign party clients) who sell and rent U.S. real state address the tax obstacles and compliance requirements imposed by the IRS, California and additional states is all we do, every day.