FIRPTA Withholding Certificate Processing Times Are Finally Improving

For many Canadian and other non-U.S. sellers of U.S. real estate, one of the most frustrating aspects of the FIRPTA regime has not been the tax itself, but the wait.

Under the Foreign Investment in Real Property Tax Act (“FIRPTA”), a buyer is generally required to withhold 15% of the gross sale price when purchasing U.S. real estate from a non-U.S. seller. In many cases, however, the seller’s actual U.S. capital gains tax liability is significantly lower than the amount withheld.

That is where Form 8288-B, Application for Withholding Certificate, becomes invaluable.

What Is an 8288-B Application?

An 8288-B application allows a foreign seller to ask the IRS to reduce the required FIRPTA withholding to the seller’s estimated maximum tax liability. Rather than remitting the full withholding amount to the IRS at closing, the funds can remain in escrow while the IRS reviews the application.

Historically, the IRS stated that withholding certificate applications would generally be processed within approximately 90 days. For many years, that timeline was reasonably accurate, making the withholding certificate process an attractive option whenever the anticipated tax liability was substantially lower than the statutory withholding amount.

COVID Created Significant Delays

Unfortunately, the COVID era dramatically changed the landscape.

Beginning in 2020, IRS processing times for withholding certificate applications increased substantially. Files that should have been processed in roughly three months often took a year or more. In some cases, applicants reported waiting well over twelve months, and occasionally approaching two years, before receiving a final determination.

These delays created difficult decisions for sellers.

If a seller proceeded with a withholding certificate application, a large amount of money could remain tied up in escrow for an extended period. On the other hand, if the seller allowed the full FIRPTA amount to be remitted to the IRS, they would still need to wait until filing a U.S. tax return, followed by the IRS refund process, before recovering any excess withholding.

Encouraging Signs in 2026

Fortunately, we are now seeing signs that IRS processing times are beginning to improve.

While applications are still not necessarily being processed within the IRS’s historical 90-day target, recent files suggest that the backlog is finally moving in the right direction and that processing times are becoming considerably more reasonable.

For example, our office recently filed an 8288-B application in April 2026 in connection with a U.S. real estate disposition. The transaction would otherwise have required approximately $330,000 USD of FIRPTA withholding. Based on a detailed maximum tax liability calculation, we demonstrated that the seller’s expected U.S. tax liability was only approximately $30,000 USD.

The IRS issued the withholding certificate in August 2026, approximately four months after filing, authorizing the reduced withholding amount.

As a result, approximately $300,000 USD was released back to the seller rather than being remitted to the IRS.

Why This Matters

The practical benefit cannot be overstated.

Had the full $330,000 been remitted to the IRS, the seller would likely have needed to wait until filing a U.S. tax return and then wait additional months for the IRS to process the refund. Depending on the timing of the sale and refund processing, that money could easily have remained unavailable for a year or longer.

Instead, the seller recovered approximately $300,000 just four months after filing the application.

A properly prepared 8288-B application can therefore accelerate the return of a substantial amount of cash by many months and significantly improve a seller’s liquidity following a transaction.

The Bottom Line

Although every case is different, recent experience suggests that withholding certificate applications are once again becoming a highly effective planning tool for foreign sellers of U.S. real estate. Where the anticipated tax liability is significantly lower than the FIRPTA withholding amount, an 8288-B application can dramatically improve cash flow and avoid prolonged delays in recovering over-withheld funds.

Careful preparation remains critical. A well-documented application supported by a thorough maximum tax liability calculation can often result in tens or even hundreds of thousands of dollars being released to the seller months before a traditional refund claim would be processed. For many foreign sellers, that makes the 8288-B application one of the most valuable planning opportunities available in a cross-border real estate transaction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.