New IRS Electronic Payment Mandate Impacts FIRPTA Transactions

Executive Order 14247, signed by President Trump on March 25, 2025, requires that all payments to and from the United States Treasury must be made through the IRS Electronic Federal Tax Payment System (EFTPS), starting September 30, 2025. After this date, the Secretary of the Treasury will stop issuing paper checks.

Exceptions to Electronic Payments:

• Individuals without access to banking services or electronic payment systems
• Emergency payments where electronic disbursement would cause undue hardship
• National security or law enforcement activities where non-EFT transactions are necessary or preferred
• Other circumstances as deemed necessary by the Secretary of the Treasury

Impact on Foreign Taxpayers and Real Estate Transactions

Under the Foreign Investment in Real Property Tax Act (FIRPTA), buyers of U.S. real property from foreign sellers must withhold 15% of the sale price and remit it to the IRS within 20 days of closing, using Forms 8288 and 8288-A. Historically, many of these payments were made via paper checks but are now required to be made electronically. Foreign taxpayers with a U.S. presence will also be affected under this new executive order.

Potential challenges with electronic payment include:

• Buyers unfamiliar with EFTPS may struggle to set up accounts in time, risking penalties for late or improper withholding remittance.
• Setting up an EFTPS requires a valid U.S. Taxpayer Identification Number (TIN), a U.S. mailing address, and up to 10 business days (if not more) to receive a TIN by postal mail. Further, foreign sellers without a U.S. address must rely on attorneys, agents, or even relatives to receive the TIN as IRS support for TIN issuances is not robust.
• Foreign sellers must confirm that withheld funds are properly deposited and credited to incur the correct final U.S. federal income tax liability.

Often, buyers have relied on their realtor or title companies for help, assuming they may handle the tax compliance even though the buyer remains liable for any FIRPTA withholding failures. This change may increase the risk of disputed closings due to delays in EFTPS setup, seller reluctance to assist or bear the cost of buyer FIRPTA compliance, reputational harm if buyers or sellers blame realtors or title agents for IRS errors or penalties, and even possible legal exposures if informal assistance is misinterpreted.

Aprio recommends that:

• FIRPTA education is provided to all transaction parties early in the sale process, along with clearly defined roles and responsibilities.
• Buyers should set up their EFTPS accounts as early as possible to avoid last-minute closing delays.
• Professional contracts (i.e., realtors, title agents, etc.) should clearly define who is liable for FIRPTA compliance.

Learn more about the details of this announcement at the Federal Register Daily Journal of the United States Government.

Contact your Aprio advisor with any questions about how this alert impacts you.