Form 1099-S: Proceeds From Real Estate Transactions (2018)

What Form 1099-S Is For

Form 1099-S is the official IRS document used to report proceeds from the sale or exchange of real estate to both you and the Internal Revenue Service. Think of it as a receipt that shows the government you sold property and how much money changed hands in the transaction.

This form covers a wide range of real estate transactions, including sales of homes (your primary residence or vacation properties), commercial buildings, undeveloped land, condominium units, cooperative housing corporation stock, and even certain timber rights. Essentially, if you transferred ownership of real property for money, property, or services, there's a good chance a Form 1099-S was generated.

The form reports the gross proceeds from your transaction—typically the sales price including cash, notes payable to you, mortgages the buyer assumed, and any loans paid off at closing. It's important to understand that receiving this form doesn't automatically mean you owe taxes. Many home sellers qualify for significant tax exclusions, especially when selling their primary residence. However, the form creates a paper trail that helps the IRS ensure all real estate gains are properly evaluated and reported on your tax return.

You'll typically receive your Form 1099-S from the person responsible for closing your transaction—usually the settlement agent, title company, attorney, or escrow company listed on your closing documents. They're required to send you a copy by February 15, 2019 (for 2018 transactions), which gives you plenty of time before the April tax deadline.

When You’d Use Form 1099-S (Late or Amended Filings)

Late Filing Situations

If you never received your Form 1099-S but sold real estate in 2018, you're still required to report the transaction on your tax return. Don't wait for the form to arrive if April is approaching—the IRS already knows about the sale because the closing agent filed their copy. You can reconstruct the necessary information from your closing statement (HUD-1 or similar document).

If you genuinely didn't receive the form, contact your closing agent to request a copy. Even if they failed to send it initially, you're not off the hook for reporting the sale.

Amended Returns

If you discover errors after filing your 2018 return—perhaps you miscalculated your gain, forgot about qualifying improvements that increase your cost basis, or incorrectly applied the home sale exclusion—you'll need to file an amended return using Form 1040-X.

This can happen if you receive a corrected Form 1099-S showing different gross proceeds than originally reported, or if you later realize you qualified for an exclusion you didn't claim. You generally have three years from your original filing deadline to file an amended return and claim a refund.

Additionally, if the closing agent made a mistake and issued a corrected Form 1099-S (marked “CORRECTED” in the checkbox), they should send you the corrected version, and you may need to amend your return if you've already filed based on the incorrect information.

Key Rules and Thresholds for 2018

The Primary Residence Exclusion

The most significant rule is the principal residence exemption. If you sold your main home for $250,000 or less (or $500,000 or less for married couples filing jointly), and you provided written certification to the closing agent that the property was your principal residence and that your entire gain qualifies for exclusion under Section 121, the closing agent was not required to file Form 1099-S.

This certification must be signed under penalties of perjury and assures that you meet the requirements: you owned and lived in the home for at least two of the five years before the sale, and you haven't used the exclusion in the past two years.

However, if you didn't provide this certification—even if you qualified—the closing agent was required to issue Form 1099-S. Receiving the form doesn't mean you owe taxes; it simply means the transaction was reported to the IRS, and you'll need to demonstrate your exclusion eligibility on your tax return.

The De Minimis Exception

Transactions under $600 are considered “de minimis” and don't require Form 1099-S reporting. This rarely applies to traditional real estate sales but might apply to transfers of small parcels or certain easements.

Exempt Transferors

Certain sellers are exempt from Form 1099-S reporting entirely. These include corporations, governmental entities (including foreign governments), and “exempt volume transferors”—those who sell 25 or more separate properties during the year as part of their regular business operations.

Foreign Sellers

If you're a foreign person (nonresident alien, foreign partnership, foreign estate, or foreign trust), the form should have checkbox 5 marked, and the transaction may be subject to special withholding rules under the Foreign Investment in Real Property Tax Act (FIRPTA).

Reportable Transactions

Not every real estate transfer requires reporting. Gifts, inheritances, foreclosures, deeds in lieu of foreclosure, abandonments, and transfers in full or partial satisfaction of a debt secured by the property are generally not reportable on Form 1099-S (though some may require other forms).

Step-by-Step: How the Process Works (High Level)

Step 1: The Sale Closes

When your real estate transaction closes, the person responsible for closing (usually identified on your settlement statement as the settlement agent, closing attorney, or title company) becomes responsible for determining whether Form 1099-S is required. This happens on the closing date—the day title transfers or when the economic burdens and benefits of ownership shift to the buyer.

Step 2: Closing Agent Evaluates Reporting Requirements

The closing agent reviews the transaction to determine if any exceptions apply. They should request your taxpayer identification number (TIN) at or before closing and may ask if you're claiming the principal residence exclusion.

If you're selling your main home and the sales price falls within the exclusion limits, they'll likely ask you to sign a certification statement confirming you qualify for the exclusion, which allows them to skip filing Form 1099-S.

Step 3: Form Generation and Filing

If Form 1099-S is required, the closing agent prepares it showing the date of closing, gross proceeds, the property address, and whether you received property or services as part of the deal. They file Copy A with the IRS by February 28, 2019 (or April 1, 2019 if filing electronically) and must furnish Copy B to you by February 15, 2019.

Step 4: You Receive Your Copy

You should receive Copy B in the mail shortly after your closing or by mid-February at the latest. Review it carefully for accuracy—verify the gross proceeds match your settlement statement and that your name and taxpayer identification number are correct.

Step 5: You Report on Your Tax Return

When preparing your 2018 tax return, you'll report the transaction even if you don't owe taxes.

• For your main home: Use Schedule D if you have taxable gain after applying the exclusion.
• For investment or rental property: Report it on Form 4797 and/or Form 6252 if you received a note.
• For like-kind exchanges: File Form 8824 if Box 4 is checked.

Step 6: IRS Matching

The IRS receives its copy of your Form 1099-S and matches it against your tax return. If they don't see the transaction reported, you may receive a notice asking for clarification or proposing additional tax. This is why reporting the sale—even if fully excluded—is essential.

Common Mistakes and How to Avoid Them

Mistake #1: Assuming No Form 1099-S Means No Reporting Required

Many sellers believe that if they didn't receive Form 1099-S, they don't need to report their home sale on their tax return. This is incorrect. Even if no form was issued, you may still need to report the sale to demonstrate exclusion eligibility.

Mistake #2: Confusing Gross Proceeds With Taxable Gain

Box 2 shows gross proceeds—the full sales price before deductions. This is not your taxable gain. Calculate your gain by subtracting your adjusted basis and selling expenses.

Mistake #3: Forgetting About the Principal Residence Exclusion

The Section 121 exclusion allows single filers to exclude up to $250,000 and married joint filers up to $500,000. Some taxpayers overlook this and report unnecessary taxable income.

Mistake #4: Not Keeping Adequate Records

Keep documentation like your purchase statement, receipts for improvements, and proof of residency to defend your exclusion or gain calculation if questioned.

Mistake #5: Mishandling Multiple Owners

Each owner must receive a separate Form 1099-S for their share of proceeds unless filing jointly as spouses. Certifications must be obtained from all sellers.

Mistake #6: Ignoring Box 6 (Buyer's Part of Real Estate Tax)

Box 6 affects deductible real estate taxes. Subtract this amount from your total deductible taxes to avoid double-counting.

What Happens After You File

IRS Matching Process

The IRS uses computer systems to match Forms 1099-S with tax returns. If the information aligns, you typically won't hear further.

Potential IRS Notices

If a mismatch occurs—like missing or incorrect proceeds—the IRS may send a notice proposing additional tax. You can respond with supporting documentation.

Audit Possibilities

Large gains, frequent sales, or questionable residence claims can increase audit risk. Maintain detailed records.

Carrying Forward Losses

Losses from investment property can offset capital gains or reduce ordinary income up to $3,000 per year, with excess carried forward.

State Tax Implications

Many states require separate reporting. Review your state’s specific rules for gain calculations and exclusions.

Maintaining Records

Keep all relevant records for at least three years, or longer if exclusions or carry-forwards apply.

FAQs

Q1: I sold my home in 2018 but never received Form 1099-S. Do I still need to report the sale?

Yes. The absence of Form 1099-S doesn’t eliminate your reporting obligation. You may have certified exclusion eligibility, but if you have taxable gain, report the sale using your HUD-1 or settlement statement.

Q2: The gross proceeds in Box 2 seem too high. Does this include my profit or the full sales price?

Box 2 shows the gross proceeds—usually the full sales price. To find your gain, subtract your adjusted basis and selling costs. This number does not represent profit.

Q3: I'm married, but only my name appears on Form 1099-S. Is this a problem?

No. When spouses jointly own property, only one Form 1099-S is needed. Report the sale once on your joint return.

Q4: Box 4 is checked on my form. What does this mean?

Box 4 indicates you received property or services instead of (or in addition to) cash—such as a like-kind exchange. You may need to file Form 8824.

Q5: Can I claim the $250,000/$500,000 home sale exclusion if I rented out part of my home?

Maybe. Partial rentals or conversions after 2008 trigger “nonqualified use” rules that can reduce your exclusion. See IRS Publication 523 for details.

Q6: I sold an investment property in 2018. Can I avoid paying taxes by doing a 1031 exchange?

Yes, if properly structured under Section 1031. Strict rules apply—file Form 8824 with your return.

Q7: The closing agent made an error on my Form 1099-S. What should I do?

Request a corrected Form 1099-S. If you already filed, amend your return using Form 1040-X with the corrected information.

Additional Resources

For authoritative guidance on Form 1099-S and real estate transactions, consult these official IRS resources:

• Form 1099-S and Instructions (IRS.gov/Form1099S)
• 2018 General Instructions for Certain Information Returns
• Publication 523 (Selling Your Home)
• Publication 544 (Sales and Other Dispositions of Assets)
• Publication 515 (Withholding of Tax on Nonresident Aliens and Foreign Entities)
• Topic 701 (Sale of Your Home)

‍