What Is Form 1099-S?

What is Form 1099-S? It is used to report the sale or exchange of real estate transactions to the IRS.

Are you filing Form 1099-S for the first time? Or are you a seasoned filer who knows the ins and outs of the realm of real estate? Whatever the situation, in this blog, we have the low-down for you on this important tax form.

What Is Form 1099-S?

Basically, Form 1099-S is used to report gross proceeds from the sale or exchange of real property. The transactions could be residential, commercial, timber/mineral rights, foreclosures, exchanges, or barter. 

So, what’s the deal with Form 1099-S? The payer, who is usually the settlement agent or closing attorney, files this form to give the IRS the data it needs to match a seller’s capital-gain reporting. With this form, the IRS can track who’s moving what amount of money around in the property market.

Gross Proceeds vs. Taxable Gain

• Form 1099-S gross proceeds box 2: This box shows the entire amount paid for the property, like cash at closing, notes, assumed debt, or any other consideration. 

• Taxable Gain: The seller figures this out later on their personal tax return. They subtract the property’s original cost (basis), improvements, selling expenses, and any allowable exclusions from those gross proceeds. 

Note: Every reportable real estate deal gets a Form 1099-S. There’s no minimum dollar threshold.

Who Must File Form 1099-S?

You could be selling your beach house or closing in on a big commercial complex. Someone has to take charge of real estate proceeds reporting to the IRS. So, who files Form 1099-S?
The person closing the transaction is responsible for filing the form. If no one is responsible for closing the transaction, the person responsible for filing the form is, in the following order:

1. The mortgage lender

2. The transferer’s broker

3. The transferee’s broker

4. The transferee.

Primary filer or the person responsible for closing:

• It’s usually the title or escrow company, settlement attorney, or any other party that prepares the final Closing Disclosure (HUD-1). 
• This filer collects the seller’s Form W-9, principal-residence certification (if any), and all settlement documents. 

When there’s no closing agent, the IRS has a backup chain 

• A mortgage lender that handles payoff funds  
• Transferor’s real-estate broker (the seller’s agent)  
• Transferee (buyer) if no one else is involved 

Designation agreement for private or FSBO deals 

The seller and buyer may agree before or at closing to designate one party to file. Most often, it’s the buyer’s attorney. Keep the signed designation with the closing packet in case of an IRS audit and for your peace of mind! 

        Special cases:

• Foreclosures and Deeds-in-Lieu: The foreclosing lender files. 
• Section 1031 Exchanges: If there’s cash “boot,” the qualified intermediary takes the lead. 

However, you may designate the person required to file the form in a written agreement. Visit the IRS for more details.

Understanding When to Report and When to Exempt

You don’t have to report every property transaction to the IRS. That’s why it’s crucial you know what entails reportable transaction and exempt transactions. Here’s a simple guide to help you save time, paperwork and stress! 

       Reportable transactions

• Standard sales or exchanges of real estate 
• Deeds in lieu of foreclosure 
• Redemption of timber/minerals 
• Sales of partial ownership interests 

        Exempt transactions (with proper documentation)

• Principal residence that fully qualifies for the §121 exclusion 
• Certain easements for utility services. 
• Corporate liquidations or bankruptcy transfers

Box-by-Box Guide to Complete Form 1099-S 

1099-S Deadlines for TY 2025

The following are the 1099-S due dates for each filing type. Forms must be transmitted to the IRS before the deadline.

• Recipient copy > February 15
• IRS eFile > March 31
• IRS paper filing > February 28

If a due date falls on a weekend or holiday, it will be due the next business day.

What’s the penalty? 

The IRS imposes an escalating penalty structure, meaning your penalty depends on how late you file. It begins at $60 per form and can go up to $660 for intentional disregard. 

How to eFile 1099-S?

Filing Form 1099-S is easier when you break down the process into manageable steps. Here’s how you can seamlessly file the form with Tax1099. 

1. The first step is signing up for Tax1099 if you’re a new user or logging into your existing account. 
2. Next, import data. Upload your closing disclosure documents or use API for automatic bulk imports. 
3. Run the automatic TIN check to ensure seller names and Tax ID numbers match IRS records. This helps avoid backup withholding. 
4. Next, the Form Builder fills in payer and seller information and completes Boxes 1-6. Just review everything. 
5. Validate and submit to the IRS. The platform double-checks everything to make sure it meets IRS requirements. It also catches any errors. 
6. Now, send recipient copies. You can choose USPS mail,  secure portal, or email with the payee’s consent. 
7. You’ve done the heavy lifting. It’s now time to track status. Monitor IRS’ “Accepted,” “Rejected,” or “Corrections Needed” real-time alerts. 
8. You’re almost done! Store your e-filed forms and certifications for at least four years in Tax1099’s secure vault. 

Tax1099 is the go-to source for your 1099 filings. You can eFile Form 1099-S Online for the year 2020 using Tax1099. Don’t wait for the deadline – eFile Now!

Common Errors and Fixes 

Watch out for these common errors to stay compliant and penalty-free! But if you catch an error, file a corrected form right away! 

• Reporting net proceeds instead of gross.  
• Filing late when principal-residence certification is incomplete.  
• Omitting FIRPTA checkbox for foreign sellers.  
• Using the seller’s mailing address in Box 3 instead of the property address.  

Quick Fix: If you spot errors, file a ‘CORRECTED’ return as soon as possible to limit penalties. The sooner you act on it, the better! 

Compliance Checklist for Payers

Navigating the intricacies of real estate tax reporting can seem daunting. But having a go-to checklist makes your life easy. 

• Start by collecting the seller’s completed Form W-9 and principal-residence certification if it’s applicable. 
• Run IRS TIN-Match check before you file. It will tell you if the name and TIN combination match IRS records. 
• Confirm your gross proceeds on the Closing Disclosure. 
• Fill out Boxes 1-6 carefully. Double-check all dates and parcel numbers. 
• Use Tax1099 to e-file your forms. After submission, verify that the IRS accepted your filing. 
• Deliver Copy B to the seller by January 31. 
• As with all tax records, retain all forms and certifications until at least 2030 for 2025 transactions. 

Real-Life Scenarios 

FAQs

1. Is there a minimum reporting threshold for Form 1099-S?
   No, Form 1099-S doesn’t have a minimum reporting requirement. You must file it for any reportable real-property transaction, regardless of price. 

2. What if the seller lost money on the property? Should the payer still file?
   Yes, you must file Form 1099-S even if the seller’s gain is zero or negative. 

3. How should I report multiple parcels sold under one contract?
   You must issue one form per parcel. You can also aggregate multiple parcels on a single form only if they share the same legal description and address. 

4. How should I handle a short sale?
   In a short sale, report the actual gross proceeds paid to the lender. The cancellation of the remaining debt is reported separately, usually on Form 1099-C. 

5. Is electronic delivery of Copy B allowed?
   Yes, e-delivery is allowed. But get the seller’s explicit consent and follow all the formatting guidelines in IRS Publication 1179. 

6. Do Section 1031 exchanges require Form 1099-S?
   Generally, yes. Unless the specific exchange qualifies for a narrow exemption with no cash boot involved. 

7. What happens if I discover an error after the March 31 deadline?
   File a CORRECTED Form 1099-S as soon as you identify the error to minimize penalties. 

Your real estate tax compliance made simple!
Tax1099 handles TIN checks and helps you eFile Form 1099-S accurately to protect your business from costly penalties. 

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