Who is required by the IRS to collect and pay the Foreign Seller tax?

The IRS requires the buyer to collect and pay the Foreign Seller tax, commonly referred to as FIRPTA (Foreign Investment in Real Property Tax Act). Under FIRPTA, when a foreign person sells real estate in the United States, the buyer, as the party acquiring the property, is responsible for withholding a portion of the sale proceeds to ensure that the appropriate taxes are paid to the IRS on behalf of the foreign seller. This practice helps prevent tax evasion by ensuring that the IRS receives its dues from non-resident sellers who may not otherwise file tax returns in the U.S.

The buyer's obligation is to withhold the tax and remit it to the IRS, ensuring compliance with U.S. tax laws and protecting the interests of the government in collecting taxes owed from foreign investors. As such, it is essential for buyers to be aware of this requirement during real estate transactions involving foreign sellers.