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.?
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
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
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
(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
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
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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Reference: Article by CLTA. Retrieved from iHouse, 10/24/08. Written in whole.
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