Requirements for FIRPTA Payments Changing on September 30, 2025

Due to recent mandates from the IRS regarding FIRPTA and the use of EFTPS (Electronic Federal Tax Payment System), starting September 30, 2025, the IRS will require all payments under the Foreign Investment in Real Property Tax Act (FIRPTA) to be made electronically. Paper checks will no longer be accepted.

Typically, the buyer, as the withholding agent, must withhold 15% of the total sale price, unless exemptions apply, such as personal residence exceptions that reduce the rate to 10% or 0%. Within 20 calendar days of the property transfer, the buyer is required to file IRS Form 8288 and Form 8288‑A and remit the withheld amount to the IRS (traditionally by paper check). But now, pursuant to an executive order issued March 25, 2025, all federal payments, including FIRPTA withholding, must be sent electronically via EFTPS, eliminating the paper‑check option effective September 30, 2025. After that date, paper checks will no longer be accepted for FIRPTA remittance, even for small transactions or buyers unaccustomed to EFTPS. Failure to comply with the electronic payment mandate can lead to penalties, interest charges, and delays in processing the transaction. Buyers will need to create an EFTPS account to make these electronic payments.

To Use EFTPS for FIRPTA Payments

Individuals and businesses must first enroll to use the EFTPS online service. This involves validating information with the IRS and receiving a Personal Identification Number (PIN) via mail. Once enrolled, payments can be made online at EFTPS.gov or through their voice response system. Users will need their TIN (Employer Identification Number or Social Security number), PIN and bank account information to schedule payments.

Payments must be scheduled by 8 p.m. ET the day before the payment due date to be considered timely. If you miss that deadline, there is a process to send a same-day wire transfer, but you need to arrange with your banking institution and file a same-day taxpayer worksheet. Upon successful payment submission, an EFT acknowledgment number will be provided as a receipt.

With these new changes, there are potential risks and challenges. How will they impact parties to a transaction involving a foreign seller?

How FIRPTA Payment Changes Affect Buyers and Withholding Agents

Buyers must be registered with EFTPS in advance of closing. The system requires enrollment, authentication (now potentially including ID.me or login.gov MFA), and an established bank linkage or PIN system. Buyers unfamiliar with the system risk being unable to remit within the 20-day window, triggering IRS penalties. To activate an EFTPS account, a United States mailing address is required to receive the PIN by mail. Note that this process can take time to set up and requires a TIN. The account activation cannot be completed without a PIN.

Timing can be a challenge. It usually takes at least 7-10 business days to receive the PIN via mail (and delays are always a possibility), making timing tight within the 20-day window to submit the funds. It’s even more difficult to activate the account and meet the deadline if the PIN needs to be sent and received internationally. So the sooner you can determine if the seller is foreign and start planning for withholding, the better. Often, such determination is made at, or just before, closing. With the new timing concern about creating the EFTPS account, it may be too late or delay the closing.

How FIRPTA Payment Changes Affect Title Companies and Closing Agents

Many buyers rely on professional intermediaries to handle withholding, often relying on their closing attorney. With EFTPS becoming mandatory, title and settlement agents must adapt. They will need to ensure their clients enroll or process the payment through their own accounts where permitted. There is a heightened liability risk considering the new requirements and timing. Buyers remain responsible legally for the payment and any interest or penalties, even if they delegate the process. Any delay or failure to remit electronically is considered noncompliance.

How FIRPTA Payment Changes Affect Foreign Sellers

Foreign sellers still receive credit for the taxes which are withheld, but only if the buyer submits the payment properly and in a timely manner. Sellers applying for a reduced withholding certificate (IRS Form 8288-B) must submit the application prior to or at closing and wait up to 90 days for approval (though real‐world delays are common). The buyer must still withhold the full 15% at closing. Remittance can be deferred until 20 days after the IRS issues the withholding certificate or denial. Sellers without a proper ITIN or documentation may face further delays, increasing escrow hold periods and impacting closing liquidity.

Next Steps to Prepare for the FIRPTA Payment Changes

Given the new requirement, here are some recommendations to prepare for the impact. First, register for EFTPS as soon as possible if you anticipate involvement in a transaction involving a foreign seller where the payment will need to be made after September 30, 2025. Second, coordinate with all parties to the closing and tax professionals well in advance of closing to confirm who will deposit and how. Ensure login credentials, client consents, and MFA access are in place. Third, include FIRPTA compliance within your closing checklists, ensuring that foreign seller identification, ITINs and ratified withholding protocols are all documented before closing. Finally, keep contingency plans in place if EFTPS access fails. Remember, delayed enrollment or lacking credentials could lead to additional delays and penalties.

The IRS’s move to mandate electronic payment via EFTPS for FIRPTA withholding represents a significant procedural shift. While intended to streamline federal tax payments, it places new burdens on buyers, title professionals and foreign sellers, notably around enrollment, credentialing, timing and compliance risk. Successful navigation requires proactive planning, clear allocation of responsibilities and early registration for EFTPS well before closing. Given the complexity of FIRPTA rules, it is recommended that buyers seek guidance from experienced real estate advisors, tax professionals, or attorneys to ensure compliance and avoid potential penalties.

Additional 1% Excise Tax to Certain Transfers Outside the U.S.

Although not effective until January 1, 2026, under the new “Big Beautiful Bill,” there is also a 1% excise tax to be imposed on certain transfers of funds sent outside of the U.S. While it does not apply only to potential FIRPTA transactions, it is important to understand that this 1% would be in addition to any funds already being withheld under FIRPTA. So, potentially, the proceeds of a sale that are already being withheld may be subject to the additional excise tax if the proceeds are being sent to an account outside the U.S. This excise tax applies to certain transfers to accounts outside the U.S., even if the receiving party is a U.S. citizen.

Still more guidance is expected on this new tax. It is unclear currently who bears the responsibility for calculating and remitting the tax and how any exemptions may apply. Although, for many agents, international wires are rare, make sure you are aware of this new law and its requirements if you transmit funds outside the U.S.

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