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Required Reporting to the IRS
Who is required to report to the I.R.S.?
Sellers of real property, under guidelines established by the I.R.S., are required to have their gross proceeds from the sale reported on a Form 1099S. When a settlement agent is used, the I.R.S. makes this agent responsible for the delivery of the information on the Form 1099S. The settlement agent generally will be the escrow agent or title company; however, it may be an attorney, real estate broker or other person providing settlement services.
What is an I.R.S. Form 1099S, and what will be reported?
The Form 1099S is the reporting form adopted by the I.R.S. for submitting the information required by law. The information will be transferred onto magnetic media by the settlement agent who will store the information and make the required report to the I.R.S. The settlement agent is also responsible for keeping a master copy of all transactions reported. In general, information required by the I.R.S. falls into the following categories:
- The name, address and taxpayer ID number (social security or tax identification #) of the seller(s).
- A general description of the property (in most cases and address.)
- The closing date of the transaction.
- The gross proceeds of the transaction (even though gross proceeds do not correspond to taxable income.)
- Any property involved as part of the transaction other than cash or cash equivalent.
- The name, address and taxpayer identification number of the settlement agent.
On what type of transaction is a Form 1099S Required?
Currently, typical homeowner transactions covered include sales and exchanges of 1-4 family residential properties such as houses and condominiums. Also reportable is stock in cooperative housing corporations and mobile homes without wheels. Specifically excluded from reporting are foreclosures and abandonment of real property and financing or refinancing of properties.
What happens if the seller(s) refuse(s) to provide the taxpayer identification number for the form 1009S?
Should the seller fail to provide the identification number and certify its correctness, the settlement agent may choose
- Delay the closing of the transaction until the information is furnished, or
- Complete the transaction and report to the I.R.S. that an attempt was made to obtain the information from the seller.
How is the sale reported when there is more than one seller involved or when multiple sellers do not own equal interests in the property?
Multiple sellers may allocate the gross proceeds among themselves for purposes or reporting. If there is no allocation, an incomplete allocation or conflicting allocations, then the entire gross proceeds will be reported for each seller.
Where can I go for further information on taxation of real property?
The I.R.S. provides free publications that explain the tax aspects real estate transactions you may wish to order:
Publication #523 - "Tax Information on Selling Your Home"
Publication #530 - "Tax Information for Owners of Homes, Condominiums and Cooperative Apartments"
Publication #544 - "Sales and Other Disposition of Assets"
Publication #551 - "Basis of Assets"
To Place your Order, Phone Toll-Free (800) TAX FORM