Required Reporting To The I.R.S.

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 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.
  7. Real estate tax paid in advance that is allocable to the buyer.

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 are sales or exchanges of improved or unimproved land, commercial or industrial buildings, condominiums, stock in a cooperative housing corporation and mobile homes (manufactured homes) affixed to real property.

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?

The settlement agent is required to request the transferor’s taxpayer identification number(s) (TIN(s)) before the time of closing. You may request a TIN on Form W-9 or use an alternative written request. The IRS has included sample wording of an alternative written request in the instructions for preparation of 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.

Article by CLTA

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Testimonials about Leah

Hiring Leah to be our realtor was the best decision we made when we sold our home in Oakland. We moved to Illinois for my work, and our relocation company required us to interview multiple realtors, all from the Oakland/Berkeley area. Leah was the first agent we interviewed, and while we completed our interviews with the other realtors, we knew right away that Leah was going to be our favorite. When Leah arrived at our house, she was full of enthusiasm and friendliness. She started off by making very positive comments about our location, the view, and her overall first impressions. Her opinions on how our location compared to different neighborhoods in the area meshed with our thinking exactly. Then she had us walk through the house, where she paid attention to every inch of every floor and walls and fixtures, asking lots of questions and taking notes and photos. After giving her the tour we sat down and Leah told us she thought our house could sell for just over 700K, and showed us the comps and discussed the trends that supported her position. She explained why certain lower comps were not applicable based on her research of those sales, and why buyers who had been in the hunt for a while (it's a seller's market in Oakland) would understand why our home had more value. She explained that she didn't think we needed to do any major repairs or upgrades, as they wouldn't increase the price of our home nearly as much as the investment we would have to put in. We left very impressed and excited (we had purchased the house a few years before for a much lower price and had expected it needed a lot of repairs). The other realtors we interviewed over the following week didn't show as much interest in our house, paid minimal attention to the details, and suggested that a lot of work was needed if we were going to get over 600k for the house. They used the comps that Leah had discounted, and scoffed at the idea that houses in the next neighborhood over would be comparable to ours. We agonized over the decision for a while. We liked Leah, we knew she would give 100% to sell our house, but what if it really wasn't worth as much as she thought? We reviewed the sales plans of each realtor, and in the end we came to the conclusion that we trusted Leah over the others, and even if she was wrong on the starting price, she would present out house in the best possible light because she understood it's value. But our fears were unfounded, Leah turned out to be completely right and worked harder than we had hoped to prove our trust was well-placed. Leah held 5 open houses and a realtor tour in 3 weeks before opening up for offers. She had a handyman make minor touches (fence repair, painting our mailbox) and paid for those repairs herself. She coordinated the cleaning, the carpet washing, the staging (she met with multiple stagers before choosing the one she felt fit our house right). While we focused on our new life in Chicago, she was back in Oakland meeting with 4 appraisers, 2 home inspectors, a termite inspector, a mold inspector, and coming to the house dozens of times to interview contractors for bids for termite work and mold remediation, and to inspect their work for thoroughness afterwards. She advised on us which contractors seemed the most professional, who was overcharging us, and made herself available whenever we scheduled a new one out for a competitive quote. When our buyer tried to get a discount after the first appraisal, she proved herself a shrewd negotiator and was able to work with the buyer's agent to avoid a significant price reduction. When our company-appointed relocation agent was slowing down the process, Leah set her straight so we could keep the deal moving. We sold our house for $705k. The other agents we had interviewed told us we'd need to do a lot of upgrades to even sell between 600 and 650, but Leah insisted our house was worth at least 700. We believed she was right. And she was right. I know the other agents would not have gotten us such a high price, and would not have showcased our best features like Leah did. Overall, I would definitely recommend Leah for anyone looking to sell their home. She puts your needs first, and will work tirelessly and enthusiastically to make sure you are happy. We used a relocation company who referred Leah (and the other realtors) to us but Leah made it clear that she worked for us, not for them. When the relocation company dragged out the process, Leah was positive, helpful, and remained enthusiastic, and we knew she had us covered. I really cannot express enough the gratitude my wife and I feel towards Leah, who took care of us so well and gave so much of her time and her own resources so that we would have the best experience and get highest sales price possible. Hire Leah. Justin R.
Thank you for lowering your fees to get our offer accepted. Thank you for paying for the home inspection and termite inspection to get it done quickly. Thank you for understanding that my deposit should not be put at risk if I don't feel comfortable. Every time I called with lender complaints you where there for me and got on the phone and straightened it out for me. You explained documents when lenders could not help me understand. You were the best buffer I have experienced. I trust you like family. I will use you again when it's time to buy or sell. Thank you so much. A.Wouldo, Buyer
Lady, you are amazing. Sold my house and pushed for more than what those agents wanted to give. Helped me clean and organize. Dropped stuff off for me and pushed those vendors to do what they said they would. It was fun and I love my new house you helped me by way out of your service area so I did not have to look for another agent. You knew what I wanted and we got it done. Your family now and forever. W. Terry Seller/Buyer
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