Title Company did not withheld tax from international seller

[rothesay]

I purchased and closed on a DVC contract from a foreign seller back in October 2016. Thinking that the Title Company will take care of everything, including submitting the IRS forms 8288 and 8288A and remitting the withholding taxes to the IRS on my behalf.

Unfortunately, at the beginning of February, I received a letter from the IRS stating that they have disallowed the seller's application to reduce the withholding tax amount as it was not filled out properly. Therefore, as the buyer, I now have 20 days to complete form 8288 and 8288A and remit any of the tax withheld.

At the suggestion of others on the forum, I have immediately contact the title company responsible for the closing of the transaction. It took them 3 days to review the copy of the letter I received from the IRS. And I have been pretty much given the run around from the closing agent in the past 2 weeks.

Today, after having been pretty much calling and emailing them every day, I finally received an email from them saying they have asked the seller to remit the tax owing to the IRS, and that's all they will do, and pretty much try to wash their hand from the entire thing. Based on this, I am assuming they have disbursed the seller's the full amount and did not withhold any tax that the seller may be liable to the IRS. Otherwise, I would assume they will simply submit the required IRS forms on my behalf and remit the tax withheld to the IRS.

I only have 4 days to submit the forms to the IRS and remit the amount the title company should withhold from the seller. So what should I do now? I feel totally helpless as being the person who has to pay for someone's mistake.

 

[njprb]

Which DVC resaler and Title Co? I would go back to my broker and get them involved, also.
My contract with an International seller passed ROFR last week. I have asked for copies of the 8288 and 8288A and the tax being paid from my Title Co and resale broker.

 

[Friendlyadvice2]

Today, after having been pretty much calling and emailing them every day, I finally received an email from them saying they have asked the seller to remit the tax owing to the IRS, and that's all they will do, and pretty much try to wash their hand from the entire thing. Based on this, I am assuming they have disbursed the seller's the full amount and did not withhold any tax that the seller may be liable to the IRS. Otherwise, I would assume they will simply submit the required IRS forms on my behalf and remit the tax withheld to the IRS.

This is ridiculous! I've been extremely unimpressed with the knowledge and professionalism of the title companies that seem to be popping up all over with the growth of the resale market. Their only concern is working with brokers and providing them a closing cost "package price", which includes a huge upcharge for unneeded title insurance, to close as many contracts as they can.

You paid the title company a significant amount of money to conduct a thorough and accurate closing, which includes the FIRPTA paperwork. This is their responsibility and they are negligent. Mistakes unfortunately happen, but once you've drawn it to their attention, they should make it right. Which means if they inadvertently dispersed the funds to the seller without withholding, then they should be remitting their own funds along with the proper paperwork to the IRS. They can figure out how to get the money from seller on their own. Unfortunately though, YOU are the responsible party now on the hook for the withholding obligation and to avoid interest and penalties, you may just have to remit the amount yourself. Have you contacted the IRS and explained the situation?

I would contact the broker to ensure they are aware of it and don't send anymore clients to the title company. They may also be able to work with the title company to resolve the issue. I don't know how much the withholding amount is compared to what an attorney's fees would be to contact the title company to attempt to resolve. Also, how do we really know the title company didn't withhold the funds and just not pay them over...that could be an angle to have the local police pay a visit to the closing company. What a mess.

 

[MouseOfCards]

Agree with others – get broker involved. And please let us know which broker and title company and title rep you used. This absolutely should not be your problem!

 

[Dean]

Agree with others – get broker involved. And please let us know which broker and title company and title rep you used. This absolutely should not be your problem!

But it is, the buyer is legally responsible if the seller doesn't pay. I'd get the state Department of Financial Services involved as a complaint against the title company. It won't hurt to involve the broker but I doubt they'll have any power in fixing it for this person, only going forward.

 

[rothesay]

Thanks for the feedback so far.

Unfortunately, it looks like I'm SOL. I suppose lesson learn if I ever purchase another contract from an international seller is I will withhold the funds myself and remit it to the IRS instead of relying on the title companies.

I have contacted the broker but I haven't heard anything back. I suppose they are staying clear away from this, even though, it was the broker who suggested to use this title company.

I have also contacted the Department of Financial Services and forward the requested documents. They said they will review the case and may open a complaint.

 

[MadHookUp]

Rothesay, you are not alone. I just got the same letter several days ago. My I ask which Broker/Title Company that you used?

 

[rothesay]

Rothesay, you are not alone. I just got the same letter several days ago. My I ask which Broker/Title Company that you used?

Hope you have better luck than I do. Would you mind sharing yours? I'm curious as to whether there is a pattern here.

I'm not sure if I am allow to publish the name of the broker and the title company I'm dealing with publicly.

 

[MadHookUp]

It appears you and I have the same Broker and Title Company. I called my Broker today and they said they are looking into this. I have yet to contact the Title Company as I want to give my broker a shot at dealing with this.

 

[rothesay]

It appears you and I have the same Broker and Title Company. I called my Broker today and they said they are looking into this. I have yet to contact the Title Company as I want to give my broker a shot at dealing with this.

Though, something to keep in mind is the clock is ticking as the IRS wants the form sent and remit to them within 20 days. I made the mistake of giving too much time. I only have 4 days left to put everything together and send them to the IRS.

 

[MadHookUp]

I think we have 10 days left. One thing I know for sure is that both my wife(lawyer) and I wont just accept this responsibility without a fight. If you would like to contact me directly, I can be reached at my username with an @gmail.com at the end.

 

[a742246]

This happened to me about 5 years ago, I called the broker and they call the title insurance company and they got back to me, they told me they would take care of it and they did. Got a letter from the IRS about a month or two later and everything was cleared. I would call the broker, they probably have more clout with the title insurance company than you do.

 

[MadHookUp]

The title company hasn't contacted me back. My broker has been very helpful so far but the title company seems to be blowing off the broker as well. Considering everything the OP has gone through with the title company, it appears as if they are unwilling to help out at all. There is a very realistic possibility that the money actually owed is nothing, or practically nothing. But if I have to shell out 2k to the IRS because of this title company, I wont go down without a fight. All signs are pointing to the title company's incompetence of not withholding the 15% of the sale, and not working with the seller to get the 8288 form filled out properly. As it appears that they are responsible for this, you would think they would be more helpful in dealing with it. Maybe they don't think the buyers are willing to take them to court.

 

[ScubaCat]

Maybe they don't think the buyers are willing to take them to court.

That's likely because you have to sue them in their jurisdiction, not where you live. That could get expensive.

 

[njprb]

Hope you have better luck than I do. Would you mind sharing yours? I'm curious as to whether there is a pattern here.

I'm not sure if I am allow to publish the name of the broker and the title company I'm dealing with publicly.

It's a shame Rothesay and MadHookUp won't share the brokerage and title company with the rest of us to protect this from happening to others. As I am in the middle of a purchase from an Int'l seller, I will stress to my broker and title company that I want to withhold the 15% and remit it to the IRS myself being that I am a CPA.

 

[CarolMN]

How about also reporting the title company to the appropriate branch of the Better Business Bureau?

http://odrcomplaint.bbb.org/odrweb/public/ourbbbcomplaintprocess.aspx?bbbid=3

Sorry this happened to you. Thanks for sharing the issue and really hope everything works out OK for you.

 

[MadHookUp]

I am only 1 day into this. I don't feel comfortable publicly shaming what could be an entirely innocent broker/title company. Especially since I haven't spoken to the title company, and the broker has been very helpful and communicative with this ordeal. Also add to the fact that I entirely rely on their assistance in resolving this. At the very least you know the broker begins with the letter F, and the title company begins with the letter D. The big issue here is that we as buyers did not know about this 8288 form. So anyone that is in the process of buying from a foreign buyer regardless if you share the same broker/title company as us, have the ability to protect themselves from this happening by going through the entire 8288 process. As I get closer to a resolution and find out who is responsible for this happening, you might get the names from me. Its entirely possible that everything was done correctly but the seller didn't dot an I, or cross a T on their 8288 form and the IRS is being difficult. There is nothing for me to gain, everything to lose.

 

[MadHookUp]

Carol, at the bare minimum, I will be doing that. At the moment my focus is getting in touch with the sellers to find out how much actual money is owed. Chances are its nothing, or close to it. I need the help of the title company and the broker to make that happen as I don't have their contact information.

 

[Dean]

Carol, at the bare minimum, I will be doing that. At the moment my focus is getting in touch with the sellers to find out how much actual money is owed. Chances are its nothing, or close to it. I need the help of the title company and the broker to make that happen as I don't have their contact information.

I doubt a seller from out of the country who has their money is likely to send a portion back.

 

[mousehockey37]

It's a shame Rothesay and MadHookUp won't share the brokerage and title company with the rest of us to protect this from happening to others. As I am in the middle of a purchase from an Int'l seller, I will stress to my broker and title company that I want to withhold the 15% and remit it to the IRS myself being that I am a CPA.

I don't know if they'd be willing, but you could always PM them and ask. At least then, it's at their discretion to tell users in a private setting, not an open discussion.

I fully understand why they're not willing to disclose anything right now. They both are in the middle of trying to resolve their issues. Even though the companies they're dealing with probably have nothing to do with here, the last thing they want is someone directing that company TO here. This is kinda like an ongoing police investigation, nothing can be released until the case has been closed. I'm sure they'll keep us updated along the way.