Key Information for 1099-S Reporting
September 26, 2023
We say it every year: Where did the time go? It seems one day it’s the Fourth of July, then suddenly, it’s 1099 season. We realize 1099 reporting is a thankless burden for all title agencies as most are required to report 1099 information to the IRS as well as furnish copies to sellers. It can be an arduous task that takes employee time, while risking penalties from the IRS if reporting is late or done inaccurately.
But don’t panic. This article will help you understand new requirements, provide important dates you need to mark on your calendar and how to best handle 1099 reporting.
What’s New This Year?Not Much
The IRS made two small changes to 1099-S reporting for tax year 2023.First, any entity filing 10 or more 1099-S forms with the IRS must do so electronically. The previous threshold was 250 filings. Almost all title agencies are already using e-filing so this is not likely to affect many of you.
Second, the IRS has launched its new IRS portal for e-filing.This allows agencies to e-file on their own with less red tape than in the previous system.However, we recommend working with a vendor to e-file. Many vendors, such as AccuTitle, make the process easier, help eliminate costly errors and do not require you to apply for an IRS Transaction Control Code.
Best Practices
- Have a 1099-S “quarterback” who creates a 1099-S plan and is responsible for all process aspects. Remember this is a year-round process, not something that you start to consider at the end of the year.
- Collect all information ahead of the closing. Do not leave yourself scrambling at the end of the year to find a seller’s social security number or discover that the SSN they provided is incorrect. It will be much harder to contact them to provide this information after the transaction is completed.
- Validate all tax IDs. The best practice is to validate tax IDs prior to the closing but at least do this prior to IRS submission. If the seller provided you with an incorrect TIN, you would likely avoid a penalty from the IRS, but you will have to endure an appeals process—validate to avoid the headache in the first place.
- Mail 1099-S to sellers each quarter. Do not wait until the end of the year. This way, you reduce the burden come January and allow the seller to identify and correct issues. You could also provide the 1099 at the closing table.
- Use A 1099-S vendor. Do not make your staff stay late at night stuffing envelopes and then crossing your figures that no mistakes were made. Vendors can allow you to avoid all this hassle and ensure your reporting goes off without a hitch.
What Should Your Software Offer?
When choosing a partner for 1099-S reporting, it is all about having a “one-stop shop” that will catch all errors ahead of reporting.
- Choose one vendor that can assist with IRS reporting and printing and mailing to sellers (a/k/a payees or transferors). You don’t want to import, validate and track these as separate processes.
- Ensure they validate every piece of data on the 1099 form. Catching errors now prevents wasted time and money later.
- Confirm that they have tax ID verification and that it is done directly with the IRS. This is one of the most common errors we see with 1099 reporting, often time it is due to an error made by the seller or their representative.
- Make sure they have tracking or audit trail capabilities. Ultimately, you will be responsible for all 1099-S reporting so make sure they provide confirmation that 1099 reporting was completed. This should include an IRS Confirmation Number for your reference.
We cannot promise that 1099-S reporting will be easy but if you follow our advice, it will at least be easier.
Important Dates
- Jan. 6, 2024: First day when 2023 1099-S information can be reported to the IRS. (Based on the end of the IRS FIRE system maintenance window in previous years. Exact date may differ.)
- Feb. 15, 2024: Due date for furnishing 1099-S to sellers. If mailed, the form must be postmarked by this date. Also, sellers or their accountants often incorrectly believe that January 31st is the due date because this is the case for other 1099 forms. You can point them tothis linkif you have this issue.
- March 31, 2024: Due date for reporting 1099-S information to the IRS, if filed electronically.
Key Links
Rick Vaughan is executive vice president of product and data management for AccuTitle, which provides the title management platforms management platforms TitleFusion, Landtech, Closers’ Choice and TrackerPro. Vaughan can be reached at rickv@accutitle.com.
Contact ALTA at 202-296-3671 or communications@alta.org.
FAQs
Use Form 1099-S Proceeds From Real Estate Transactions to report proceeds from real estate transactions. How the property is used (personal, investment, business) will determine where the information is reported.
How do I report 1099-S for an inherited house? ›
Your share of sales proceeds (generally reported on Form 1099-S Proceeds From Real Estate Transactions) from the sale of an inherited home should be reported on Schedule D (Form 1040) Capital Gains and Losses in the Investment Income section of TaxAct.
How do I report a sale of inherited property to the IRS? ›
Report the sale on Schedule D (Form 1040), Capital Gains and Losses and on Form 8949, Sales and Other Dispositions of Capital Assets: If you sell the property for more than your basis, you have a taxable gain.
How do you report real estate sales to the IRS? ›
Reporting the Sale
Report the sale or exchange of your main home on Form 8949, Sale and Other Dispositions of Capital Assets, if: You have a gain and do not qualify to exclude all of it, You have a gain and choose not to exclude it, or. You received a Form 1099-S.
How does a 1099-S affect my taxes? ›
Form 1099-S reports the date of sale and the gross proceeds of the transaction, and it has been sent to the IRS, so a taxpayer who has received one must report it on their tax return. Sale of business property is reported on Form 4797, otherwise the transaction is reported on Form 8949.
How do I report a 1099 SA? ›
Information from Form 1099-SA is reported on either Form 8853 or Form 8889. Unused distributions from an HSA must be reported as income. You can repay a mistaken distribution from a health savings account no later than April 15.
Is money from the sale of an inherited house considered income? ›
In summary, money received from the sale of inherited property is considered taxable income to the extent that there is a gain on the sale. The gain is calculated as the difference between the sale price and the property's basis, which is generally the FMV at the date of the decedent's death.
Do you always get a 1099-S when you sell your house? ›
When you sell your home, federal tax law requires lenders or real estate agents to file a Form 1099-S, Proceeds from Real Estate Transactions, with the IRS and send you a copy if you do not meet IRS requirements for excluding the taxable gain from the sale on your income tax return.
Who is exempt from 1099-S? ›
Additionally, a 1099S is not required for the sale or exchange of a principal residence with gross proceeds of $250,000 or less ($500,000 or less for married filing jointly) if an acceptable written assurance (certification) from the seller is obtained that indicates the full gain is excludable from the seller's gross ...
How to determine the cost basis of inherited property? ›
The basis of property inherited from a decedent is generally one of the following: The fair market value (FMV) of the property on the date of the decedent's death (whether or not the executor of the estate files an estate tax return (Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return)).
The sales price is the gross proceeds you received in giving up the property. That's the amount that was paid down or paid off, plus any other consideration you received in the transaction. Compute your gain or loss in the usual way — Sales price minus your adjusted basis in the property.
What is the inherited capital gains tax loophole? ›
The Step-Up in Basis loophole is used to circumvent capital gains taxes, or to pay the least amount of this type of inheritance tax as is legally possible. This loophole can be used on inherited assets that have appreciated in value from the time they were purchased.
How do I report a 1099-S on my tax return? ›
Possible reporting options include, but are not limited to:
- Schedule D, Capital Gains and Losses.
- Form 4797, Page 1, Sales of Business Property.
- Form 4797, Page 2, Enterable 4797 Sales of Business Property.
- Form 4835, Farm Rental Income and Expenses.
- Form 8824, Like-Kind Exchanges.
- Adjusted Basis of Home Sold Worksheet.
It depends on how long you owned and lived in the home before the sale and how much profit you made. If you owned and lived in the place for two of the five years before the sale, then up to $250,000 of profit is tax-free. If you are married and file a joint return, the tax-free amount doubles to $500,000.
How does IRS know you sold real estate? ›
Typically, when a taxpayer sells a house (or any other piece of real property), the title company handling the closing generates a Form 1099 setting forth the sales price received for the house. The 1099 is transmitted to the IRS.
How do you report the sale of a timeshare on your tax return? ›
Sale of a timeshare or vacation home: A timeshare or vacation home is considered a personal capital asset and the sale is reported on Schedule D Capital Gains or Losses. A gain on such a sale is reportable income. If you incurred a loss on the sale, the IRS doesn't allow you to deduct the loss.
What do I do with 1099s I receive? ›
Whether you receive all of your 1099 forms or not, taxpayers must report the income when they file their taxes. Taxpayers do not need to send their 1099 forms to the IRS when filing but should report any errors on their 1099s.
How do I report a 1099-S on my tax return TurboTax? ›
Form 1099 S is entered in the Less Common Income section of Turbo Tax(online or desktop).
- Select Federal Taxes.
- Select Wages and Income.
- Scroll down and select Show More at Less Common Income.
- Select Start at Sale of Home.
- The program will prompt you on how to handle if this home or property was not your primary residence.
