IRS Form 1099S Requirements

The real estate settlement agent will provide you with Form 1099-S to use when preparing your taxes.

The 1099-S is the federal form used to report gross proceeds from real estate sale transactions. Congress has made it mandatory that all settlement agents process the form prior the close of escrow. If the form is not processed, agents can face a penalty from the Internal Revenue Service; therefore, it is important to know the requirements necessary for filling out the 1099-S form.

Transactions To Be Reported

The 1099-S should be filled out by the person closing the real estate transaction. Any transaction where money is taken in exchange for a sale of property, services or future ownership, should be reported on the form. This includes land; residential, commercial or industrial buildings; condominium units and any stock in a cooperative housing corporation. Foreclosure sales, any transaction less than $600, gifts, sellers who are corporations and any non-sales or exchange transactions such as inherited property, are exempt from being reported.

Multiple Sellers

If there are multiple sellers, the agent is required to request a written or non-written allocation from the sellers to explain how the 1099-S forms should be filed. The agent can accept the allocation from one of the sellers if it is complete and verified by the other seller. It is recommended that he verify it with all sellers involved to avoid an incomplete or inaccurate report of gross proceeds. It is important to do so because if inaccurate or conflicting information is received from the multiple sellers, the agent will be required to report 100% of the gross sales to each seller.

Foreign Sellers

All foreign sellers are subject to reporting their real estate sales, and the rules for the 1099-S form are no different for foreign sellers. One should note that on the form, domestic sellers are required to input either a Taxpayer Identification Number (TIN) or Social Security Number (SSN) for tax purposes only. Foreign sellers can request a TIN by filling out Internal Revenue Service Form W-7.