Major changes are underway in how the federal government handles money—and the real estate industry should pay close attention.
On March 25, 2025, the Trump Administration issued Executive Order (EO) 14247 and EO 14249, directing the U.S. Department of Treasury to modernize the government’s payment and infrastructure to eliminate the use of checks and money orders. These efforts are designed to strengthen the integrity of federal financial operations by reducing waste and fraud, while also improving operational efficiency and enhancing the customer experience.
One of the most impactful consequences of EO 14247 is the Internal Revenue Service (IRS)’s new requirement that all Foreign Investment in Real Property Tax Act (FIRPTA) withholding payments be submitted electronically. Let’s explore what’s on the horizon and how this impacts buyers, foreign sellers, settlement agents and real estate agents during FIRPTA transactions.
What’s Changing
Under FIRPTA regulations, the buyer—acting as the withholding agent—is generally required to withhold 15% of the property's total sale price, unless specific exemptions apply that lower the rate to 10% or require no withholding at all. Within 20 calendar days of the property transfer, the buyer must file IRS Forms 8288 and 8288-A and remit the withheld funds to the IRS. Traditionally, this payment has been made by paper check and often handled by a settlement agent or closing attorney. Foreign sellers, while subject to the withholding, were not directly involved in the payment logistics and received any applicable refund by paper check, even if they lacked a U.S. bank account.
Now, under the new mandate, withholding funds will be submitted via the IRS’s Electronic Federal Tax Payment System (EFTPS®), which introduces several new requirements:
- A valid Social Security Number (SSN) for U.S. citizens or an Individual Tax Identification Number (ITIN) for non-resident aliens
- A U.S. mailing address
- A PIN that is mailed by the IRS
Paper checks will no longer be accepted and buyers who fail to remit timely electronic payments could face interest, penalties and delays in processing. Additionally, refunds will be issued electronically and foreign sellers must have a U.S. bank account to receive them.
Things to Consider
Originally scheduled to take place September 30, 2025, the mandate has been postponed to an undetermined date. According to IRS notice IR-2025-94, additional guidance and information may be issued prior to the 2026 tax filing season. Although the exact timing of the transition is unknown, all parties involved in a FIRPTA transaction should be prepared for a future switch to EFTPS®. To help, we’ve compiled a list of some important things to consider:
Buyers:
- Withholding agent: The buyer is legally responsible for submitting FIRPTA payments within 20 days of closing.
- EFTPS®: Enroll early to avoid penalties and closing delays and maintain proof of payments submitted via the EFTPS® system.
- Penalties for late payment: Up to 25% of the amount withheld, if not submitted on time.
- Coordinate with the closer: Clarify who will make the payment and ensure EFTPS® access.
- Coordinate with tax professionals: Work closely with tax advisors to confirm withholding amounts and handle required forms.
Foreign Sellers:
- ITIN: Provide a valid ITIN or apply for one, if needed.
- Reduced withholding certificate (Form 8288-B): If you are applying for the certificate, it must be submitted well before the closing – it can take up to 90 days for approval.
- U.S. mailing address: New requirement to receive IRS correspondence and EFTPS® pin, if needed.
- Delays: Understand that delays in a buyer’s EFTPS® setup can affect the seller’s tax credit.
Real Estate Professionals:
- Educate clients early: Discuss FIRPTA and electronic payment requirements during listing or contract negotiation.
- Encourage early ITIN and EFTPS® setup: Especially for foreign sellers and buyers.
- Clarify roles in contracts: Specify who will handle FIRPTA payments and how.
- Monitor IRS processing times: Delays in ITINs, withholding certificates or EFTPS® setup can affect closing timelines.
Closing/Settlement Agents:
- Update procedures: Make sure you and your clients are fully aware of EFTPS® requirements and FIRPTA compliance.
- EFTPS® assistance: If authorized, assist buyers with setup if it does not incur legal responsibility.
- Neutral third-party: Closing/settlement agents are not licensed or authorized to prepare FIRPTA tax forms or provide any legal advice.
- Prepare for delays: EFTPS® setup, or international logistics such as language barriers, can cause delays in processing.
- Holdback: If a seller’s ITIN or withholding certificate is pending, a holdback of funds may be necessary.
At Old Republic Title, we understand FIRPTA compliance is important in facilitating a smooth and timely closing in real estate transactions involving foreign persons. With the IRS soon requiring mandatory electronic payments, we remain dedicated to monitoring the changes and keeping our clients informed. To learn how Old Republic Title can help you with your next transaction, visit oldrepublictitle.com/locations to find an office near you.
This material is for educational purposes only and does not constitute legal advice. Old Republic Title strongly recommends that consumers obtain guidance and advice from qualified professionals, including attorneys specializing in real property law, probate law, or tax law to get more detailed and current information as to their particular situation.
