I’m a nonresident alien and received a Form 8288-A from the settlement title company or attorney who handled the sale of real property located in the United States that I owned for many years. Why did I get it and how does it affect me

As a nonresident alien, you received Form 8288-A because the buyer (transferee) of your U.S. real property is required to withhold tax on the sales proceeds when acquiring the property from a foreign person. This withholding is mandated by the Foreign Investment in Real Property Tax Act (FIRPTA) to ensure that the U.S. tax that may be owed by the foreign person is collected.

Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests, is used to report the details of the sale, including the amount of U.S. tax withheld. The form is transmitted to both you (the seller) and the IRS.

Here’s how it affects you:

1. Tax Reporting: The gain or loss from the sale of your U.S. real property must be reported on Form 1040-NR, U.S. Nonresident Alien Income Tax Return. You need to include the details of the sale and the amount of tax withheld as shown on Form 8288-A.
2. Tax Credit: The amount of U.S. federal income tax withheld, as listed on your Form 8288-A, must be entered in the Payments section on page 2 of Form 1040-NR. This allows you to receive credit for the tax withheld against your total tax liability.
3. Filing Requirements: If the property was jointly owned with your spouse, each of you must file separate Form 1040-NR tax returns. You will need to complete your own individual Form 1040-NR, including a Schedule D, and divide all amounts equally when completing the various forms.
4. Withholding Certificate: If you believe the withholding amount is more than your actual tax liability, you can apply for a withholding certificate to reduce or eliminate the withholding on the disposition of U.S. real property interests by filing Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests.
5. IRS Processing: The IRS processes Form 8288 and Form 8288-A to ensure the correct amount of tax is withheld and credited. If the forms are incomplete or incorrect, the IRS may correspond with you or the withholding agent to obtain the necessary information.

In summary, Form 8288-A is crucial for ensuring that the correct amount of tax is withheld and reported to the IRS. It also provides you with the documentation needed to claim the withheld tax as a credit on your U.S. tax return.

Sources:
Publication 519 (2023)
§ 897. Disposition of investment in United States real property
IRM Part 3. Submission Processing. Chapter 21. International Returns and Documents Analysis. Section 261. Foreign Investment in Real Property Tax Act (FIRPTA)
IRM Part 3. Submission Processing. Chapter 22. International Error Resolution. Section 261. Foreign Investment in Real Property Tax Act (FIRPTA)
IRM Part 3. Submission Processing. Chapter 38. International Tax Returns and Documents. Section 147. International Notices
IRM Part 3. Submission Processing. Chapter 21. International Returns and Documents Analysis. Section 25. Miscellaneous Tax Returns