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Sellers of real property will have certain information
regarding the sale reported to the Internal Revenue Service.
This required reporting is a consequence of the Tax Reform
Act of 1986; it is intended to encourage taxpayer compliance
and aid in audit and enforcement efforts by the I.R.S.
To help you better understand this subject, the Land Title
Association has answered some of the questions most commonly
asked about Required Reporting to the I.R.S.
Who is required to report to the I.R.S.?
A. 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:
(1) The name, address and taxpayer ID number (social
security or tax identification number) of the seller(s)
(2) A general description of the property (in most cases an
address)
(3) The closing date of the transaction
(4) The gross proceeds of the transaction (even though gross
proceeds do not correspond to taxable income)
(5) Any property involved as part of the transaction other
than cash or cash equivalent
(6) The name, address and taxpayer identification number of
the settlement agent.
On what type of transactions is a Form 1099S required?
Currently, typical homeowner transactions covered include
sales and exchanges of 1-4 family residential properties
such as houses, townhouses, 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) refuses to provide the
taxpayer identification number for the Form 1099S?
Should the seller fail to provide the identification number
and certify its correctness, the settlement agent may choose
to:
(1) Delay the closing of the transactions until the
information is furnished, or
(2) 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 of 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 of real estate transactions. You may wish to order:
Publication #523 "Tax Information on Selling Your Home"
Publication #530 "Tax Information for Home Owners"
Publication #544 "Sales and Other Dispositions of Assets"
Publication #551 "Basis of Assets"
To place your order, phone toll-free (800) 829-3676
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