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.
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.
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:
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.
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:
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.
The I.R.S. provides free publications that explain the tax aspects of real estate transactions. You may wish to order:
To place your order, phone toll-free (800) 829-3676.
Article by CLTABack to Table of Contents
October 4, 2013
To Whom It May Concern:
This letter is being written because of property that I have owned since 1990 in Harrisonburg Virginia which I bought through Hess & Miller Real Estate. Over some 20 years I was an absent home owner at this property and were in need of someone to manage the property and renters. We chose Hess & Miller Real Estate. For the majority of those years I was oceans apart from the Harrisonburg property but was kept well informed of any needs or changes concerning the property. I was very pleased the integrity and organization that Rick Martz did for me in giving oversight to the property. I remember one time he assured me that he took care of it as if it was his own property; this definitely was a plus being that most those years we were more than a thousand miles away in another country. Rick was helpful in making suggestions when changes happened whether it was concerning repairs of the property or renters. We definitely were blessed and hope in the future others that choose Hess & Miller Real Estate may experience the same genuine service!Sincerely, June L. Weaver June L. Weaver