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Required Reporting to the I.R.S.

By Terry Michaud OfficeNovember 08, 2017
IRSTax ReportingReal Estate Transaction

As a result of the Tax Reform Act of 1986, sellers of real property will have certain information regarding the sale reported to the Internal Revenue Service. This reporting is intended to encourage taxpayer compliance and aid in audit and enforcement efforts by the I.R.S.

Reporting Requirements

Who Must Report?

  • Sellers of real property must report gross proceeds
  • Settlement agents responsible for information delivery
  • Usually escrow agent or title company
  • May be attorney or real estate broker

Form 1099S

What is Reported?

The Form 1099S includes:

  1. Seller Information

    • Name
    • Address
    • Taxpayer ID number

  2. Property Information

    • General description
    • Address in most cases

  3. Transaction Details

    • Closing date
    • Gross proceeds
    • Property other than cash involved

  4. Additional Information

    • Settlement agent details
    • Buyer's portion of real estate tax

Covered Transactions

Types of Property

Reportable transactions include:

  • 1-4 family residential properties
  • Improved/unimproved land
  • Commercial buildings
  • Industrial buildings
  • Condominiums
  • Stock in cooperative housing
  • Mobile homes (manufactured homes)

Excluded Transactions

  • Foreclosures
  • Abandonments
  • Financing/refinancing

Handling Multiple Sellers

Allocation Options

  • Sellers may allocate gross proceeds
  • Without allocation, full amount reported for each
  • Incomplete allocations reported in full
  • Conflicting allocations reported in full

Compliance Requirements

Obtaining Tax ID Numbers

  1. Settlement Agent Duties

    • Must request TIN before closing
    • Can use Form W-9
    • May use alternative written request

  2. Non-Compliance Options

    • Delay closing until provided
    • Complete transaction and report attempt

Tax Information Resources

IRS Publications

Free publications available:

  1. "Tax Information on Selling Your Home"
  2. "Tax Information for Home Owners"
  3. "Sales and Other Dispositions of Assets"
  4. "Basis of Assets"

How to Order

  • Call toll-free (800) 829-3676
  • Request by publication number
  • Available at no cost

Important Considerations

  1. Timing

    • Information needed before closing
    • Delays possible without TIN
    • Early compliance recommended

  2. Accuracy

    • Verify information carefully
    • Report changes promptly
    • Keep copies of all documents

  3. Privacy

    • Information protected by law
    • Used only for tax purposes
    • Secure handling required

Conclusion

Understanding and complying with IRS reporting requirements is essential for a smooth real estate transaction. Early preparation and accurate information help prevent delays and ensure proper reporting.