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Required Reporting to the Internal Revenue Service

While the buyer will want to make sure their purchase is recorded with the country or city, sellers of real property, where real property is the land (I.e., dirt), will need to share certain information regarding the sale to the Internal Revenue Service (IRS). This required reporting of information is intended to encourage taxpayer compliance with the Internal Revenue Code and aid in audit and enforcement efforts by the IRS.

Who is required to report to the IRS?

Sellers of real property and everything that is permanently attached (I.e. house) to the land. Under guidelines established by the IRS, sellers are required to have the dollar amount of their gross proceeds from the sale reported on a Form 1099-S. When a settlement agent is used, the IRS requires the settlement agent to file the 1099-S form. In this setting, the settlement agent will generally be your escrow officer or title company; however, it may be an attorney, real estate broker or other person providing settlement services.

What is an IRS form 1099-S, and what will be reported?

The Form 1099-S is the reporting form adopted by the IRS for submitting the Seller’s gross proceeds information required by law. The Form 1099-S will capture the following information about the real property seller and transaction:

  • The name, address, and taxpayer ID number (Social Security or tax identification number (TIN) of the seller(s)
  • A general description of the property (and in most cases an address)
  • The closing date of the transaction
  • The gross proceeds of the transaction (even though gross proceeds do not correspond to taxable income)
  • The name, address, and taxpayer identification number of the settlement agent
  • Real estate tax paid in advance that is allocable to the buyer

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?

For more information, please visit: www.irs.gov/forms-pubs/about-form-1099-s.

This article is part of the Home Seller Guide.