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Posted by My interest on December 20, 2006, 1:26 am
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I am a US resident and bought a house in July. Yesterday I
received a letter from IRS which imposed $17,800 penalty and
$2,437 interest. After spending the whole morning on the
phone and spoke to 10+ IRS agents, I found out that it was
because the seller of the house was not a US resident and
the seller's lawyer (or combination of my lawyer and the
seller's lawyer) didn't file the 8288 form in time as
required by the law.
I have talked to my lawyer and he is working with the
seller's lawyer to see whether they can persuade IRS to
cancel the charge. However I browsed the IRS website and
discussed with an IRS agent, aparantly I was legally liable
for this charge even though I was innocent in this whole
process.
So I hope the two lawyers can work out something with IRS.
But my question to this group is, in case IRS still insist
on some penalty/interest on me (either in full which is
$20K+ or part of that as a deal), what option do I have?
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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Posted by A.G. Kalman on December 20, 2006, 10:30 pm
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My interest wrote:
> I am a US resident and bought a house in July. Yesterday I
> received a letter from IRS which imposed $17,800 penalty and
> $2,437 interest. After spending the whole morning on the
> phone and spoke to 10+ IRS agents, I found out that it was
> because the seller of the house was not a US resident and
> the seller's lawyer (or combination of my lawyer and the
> seller's lawyer) didn't file the 8288 form in time as
> required by the law.
>
> I have talked to my lawyer and he is working with the
> seller's lawyer to see whether they can persuade IRS to
> cancel the charge. However I browsed the IRS website and
> discussed with an IRS agent, aparantly I was legally liable
> for this charge even though I was innocent in this whole
> process.
>
> So I hope the two lawyers can work out something with IRS.
> But my question to this group is, in case IRS still insist
> on some penalty/interest on me (either in full which is
> $20K+ or part of that as a deal), what option do I have?
Not the seller's lawyer. The buyer is responsible for
withholding the tax due on the sale and remitting the amount
to the IRS usually within 20 days of the sale. This is
usually handled by the title or escrow company that is
handling the closing. Either way, you as the buyer are
responsible. You may have a claim against the individual or
firm that represented you at the closing.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Mark Bole on December 23, 2006, 2:06 am
Please log in for more thread options A.G. Kalman wrote:
> My interest wrote:
>> I am a US resident and bought a house in July. Yesterday I
>> received a letter from IRS which imposed $17,800 penalty and
>> $2,437 interest. [...] aparantly I was legally liable
>> for this charge even though I was innocent in this whole
>> process.
[...]
> Not the seller's lawyer. The buyer is responsible for
> withholding the tax due on the sale and remitting the amount
> to the IRS usually within 20 days of the sale. This is
> usually handled by the title or escrow company that is
> handling the closing.
Interesting escrow company scam. By comparison, the same
thing can happen domestically. In a recent residential real
estate closing in California, which also requires the buyer
to handle CA state tax withholding, the escrow company put a
charge on the sellers' bill to provide the paperwork for the
withholding. When challenged why the seller should pay for
something that was the buyer's legal responsibility, the
escrow agent said, "Oh, no one has ever asked that
before...".
-Mark Bole
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by pgattocpa on December 25, 2006, 10:13 am
Please log in for more thread options My interest wrote:
> I am a US resident and bought a house in July. Yesterday I
> received a letter from IRS which imposed $17,800 penalty and
> $2,437 interest. After spending the whole morning on the
> phone and spoke to 10+ IRS agents, I found out that it was
> because the seller of the house was not a US resident and
> the seller's lawyer (or combination of my lawyer and the
> seller's lawyer) didn't file the 8288 form in time as
> required by the law.
>
> I have talked to my lawyer and he is working with the
> seller's lawyer to see whether they can persuade IRS to
> cancel the charge. However I browsed the IRS website and
> discussed with an IRS agent, aparantly I was legally liable
> for this charge even though I was innocent in this whole
> process.
>
> So I hope the two lawyers can work out something with IRS.
> But my question to this group is, in case IRS still insist
> on some penalty/interest on me (either in full which is
> $20K+ or part of that as a deal), what option do I have?
I am totally not an expert on this so I went to the IRS
website. According to what I read, the W/H rate is 10%. If
the tax was $17,800 as mentioned above, then the purchase
price was $178,000. (This would equate to the "amount
realized" mentioned on the IRS site). There is an exception
to W/Hing if the purchase is for a primary residence and the
purchase price is "not more than $300,000".
So, is this your primary residence? According to the IRS
site, a house will qualify as a primary residence under the
following conditions:
BEGIN QUOTE
You or a member of your family must have definite plans to
reside at the property for at least 50% of the number of
days the property is used by any person during each of the
first two 12-month periods following the date of transfer.
When counting the number of days the property is used, do
not count the days the property will be vacant.
END QUOTE
There are many more exceptions at the following link:
http://www.irs.gov/businesses/small/international/article/0,,id=102254,00.html
Following is the tiny URL
http://tinyurl.com/y2rdfa
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by My interest on December 28, 2006, 12:26 am
Please log in for more thread options Thanks for all the responses. My lawyer has hired a tax
lawyer to deal with IRS on this matter. And it seems that
he may be willing to take the final penalty.
Frankly as a new comer to US, I was very surprised the way
IRS (and some other aspects) treats the tax payer.
Taking my case as an example. I guess the reason why IRS
imposes the W/H duty on buyer is because it cannot easily
enforce the seller to pay. However the point is, IRS is
after the wrong person! To me, IRS simply "legalizes" its
incapacility by forcing sb else to do the job for him, free
of charge. (Can I bill IRS for providing the tax collection
service to it?) From my perspective, I hired a licensed
lawyer to do the legal work. But I am responsible for his
mal-practice which ultimately is because of IRS'
incapability. If, for whatever reason, my lawyer is
out-of-business, I will be penalized for being totally
innocient.
This is just one example (if anybody is interested, I can
give more examples). I don't know what you guys as
long-term US residents think about this, but all these look
non-sense to me.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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