What is Form 1099-S?
Form 1099-S, Proceeds from Real Estate Transactions, is an Internal Revenue Service (IRS) form used to report the sale or exchange of real estate property. Some examples of real estate transactions could be realizing gains or proceeds from the sale of land, commercial and industrial buildings, as well as residential properties, such as a home or condominium.
Form 1099S is one type of 1099 form. 1099 forms are used to report particular types of income that a taxpayer has earned throughout the tax year, besides income earned from employment. As there are various ways to earn income outside of employment, there are similarly many different types of 1099 forms, with one being this Form 1099-S.
1099 forms are important as they help the IRS and taxpayers keep track of their income from different sources and how it contributes to the taxes they must file.
Generally, the IRS 1099-S Form must be used to report real estate transactions that consist in whole or in part of the sale or exchange for money, satisfying or establishing a debt, property, or services of any present or future ownership interest in any of the following:
- Improved or unimproved land, including air space.
- Inherently permanent structures, including any residential, commercial, or industrial building.
- A condominium unit and its appurtenant fixtures and common elements, including land.
- Stock in a cooperative housing corporation (as defined in section 216).
- Any non-contingent interest in standing timber.
However, it is highly advised that a taxpayer consult a tax professional after a real estate transaction is finalized, however, as some real estate transactions can be exempt from having to pay taxes depending on the taxpayer’s financial situation. Alternatively, you may consult the instructions for Form 1099 S on the IRS website for more details on the details and exceptions that may cause a taxpayer to not have to file Form 1099-S.
There are multiple copies of Form 1099-S that must be filled out. The same instructions as written below apply to all copies of the form - however, different copies will be required for different purposes. You can see the “version” or “copy title” of the form on the right side of the form.
Copy A, which is to be submitted alongside Form 1096 to the IRS. There are particular instructions for how to submit this copy, which can be found in the General Instructions for Certain Information Returns on the IRS website.
Copy B is for the transferor.
Copy C is for the person filing the form.
Who needs to use Form 1099-S?
The person who closes the real estate transaction is generally the one who must file Form 1099-S. However, if there was a closing disclosure used as part of the transaction, and another person is listed on the closing disclosure as the settlement agent for the transaction, then that person is the one who must file Form 1099-S.
If no closing disclosure is used, or more than one closing disclosure is used, then the person who must file Form 1099S is, in this order, one of the following:
- The transferee's attorney who is present at the delivery of either the transferee's note or a significant part of the cash proceeds to the transferor or who prepares or reviews the preparation of the documents transferring legal or equitable ownership,
- The transferor's attorney who is present at the delivery of either the transferee's note or a significant part of the cash proceeds to the transferor or who prepares or reviews the preparation of the documents transferring legal or equitable ownership, or
- The disbursing title or escrow company that is most significant in disbursing gross proceeds.
For other possible situations and to properly determine who must file Form 1099-S, consult the instructions for Form 1099-S on the IRS website.
How to fill out Form 1099-S?
Form 1099-S is a very short and simple form to fill out. It may be beneficial to have the documents relevant to the real estate transaction ready in order to ensure that you enter the correct information in the correct fields.
Enter the following information in the box provided.
Enter the filer’s full legal name.
Enter the filer’s address here. The address consists of the following information:
- ZIP or Foreign Postal Code
Enter the filer’s primary telephone number.
Filer’s Taxpayer Identification Number
Enter the filer’s Taxpayer Identification Number (TIN).
Enter the Transferor’s TIN.
Enter the full legal name of the transferor.
Transferor’s Street Address
Enter the transferor’s main street address. Include their apartment number, if applicable.
Transferor’s City or Town, State or Province, and ZIP or Foreign Postal Code
Enter the transferor’s city or town and state or province, and their ZIP or Foreign Postal Code as of the time of filing the 1099-S Form IRS.
If there are multiple accounts for a transferor, and thus more than one copy of Form 1099-S filed, enter one of the account numbers here, and remember to file another Form 1099-S for each other account number. The IRS also encourages you to designate an account number for all Forms 1099-S that will be filed, so it may be beneficial to assign an account number for this form even if you only need to file one Form 1099-S.
Box 1 - Date of Closing
Enter the date that the real estate transaction was closed or resolved.
Box 2 - Gross Proceeds
Enter the gross proceeds earned from the real estate sale or exchange.
Box 3 - Address
Enter the address of the property that was sold or exchanged. Include the following information:
- City or Town
- State or Province
- ZIP code
If the address does not sufficiently identify the property that was sold, enter a legal description, such as section, lot, or block.
Box 4 - Transferor Received or Will Receive Property or Services as Part of the Consideration
If the transferor received or will receive property other than cash or particular services as part of the consideration for the property, mark the box provided.
Box 5 - Transferor is a Foreign Person
If the transferor is a foreign person, such as a nonresident alien, a foreign partner, foreign estate, or foreign trust, mark the box provided.
Box 6 - Buyer’s Part of Real Estate Tax
For a real estate transaction involving a residence, enter the real estate tax paid in advance that may be allocated to the buyer. You may use the appropriate information included on the Closing Disclosure, or comparable form, provided at closing.
Tips when filling out Form 1099-S
Form 1099-S contains personal information such as the transferor and filer’s address and TIN, as well as important information on taxes and transactions they have conducted. Thus, it is important to keep this form safe and to ensure that it is submitted through organized and trustworthy means to the correct places and people in order to avoid any issues such as identity theft or tax fraud.
Make sure all information entered is correct, and that the form is submitted to the appropriate place on time. This will help avoid any consequences for giving the IRS the wrong information and ensure that your tax returns will be processed properly.
Make sure to fill out every copy of the form, and keep in mind where each copy should be used. This is important as each copy of the form is for use in different situations. Make sure that you are using the proper copy for the proper purpose to avoid any legal or tax issues.
Practice good contract management. Make sure to keep your copy of the form in a safe and organized area, or even copy it again in order to be doubly sure that you have a backup in case the original is damaged in some way. This will be useful for possible legal purposes in the future, or even simply as a record.