Form 1099-S: Proceeds From Real Estate Transactions (2020)
Whether you're a homeowner, real estate investor, or closing agent, understanding Form 1099-S is essential when selling property. This guide breaks down everything you need to know about this important tax document for the 2020 tax year in plain language.
What Form 1099-S Is For
Form 1099-S, officially titled “Proceeds From Real Estate Transactions,” is the IRS document used to report the sale or exchange of real estate to both the Internal Revenue Service and the property seller. Think of it as a receipt that documents how much money changed hands when real property was transferred from one owner to another.
The form captures critical information about real estate transactions, including the closing date, gross proceeds (the total amount received), and details about the property sold. It covers a wide range of real estate, from your primary home to vacant land, commercial buildings, condominiums, cooperative housing corporation stock, and even standing timber with non-contingent interests.
The person responsible for closing the transaction—typically the title company, escrow agent, settlement attorney, or mortgage lender—must file this form with the IRS and provide a copy to the seller. This ensures that the IRS knows about the transaction and can verify that any taxable gain is properly reported on the seller's tax return.
It's important to understand that receiving a Form 1099-S doesn't automatically mean you owe taxes. For example, if you sold your main home and qualify for the home sale exclusion under Section 121 of the tax code (up to $250,000 for single filers or $500,000 for married couples filing jointly), you may owe no tax at all. However, you still must report the transaction on your tax return if you receive the form.
When You’d Use It (Late/Amended Filings)
For Closing Agents and Filers
Form 1099-S must normally be filed with the IRS by February 28, 2021 (for paper filing) or March 31, 2021 (for electronic filing) for transactions that closed during the 2020 calendar year. Copies must be provided to sellers by February 1, 2021.
If you miss these deadlines, you should file as soon as possible to minimize penalties, which can range from $50 to $280 per form depending on how late the filing is. Late penalties increase the longer you wait, so prompt action is critical.
Corrected Forms
Mistakes happen. If you discover an error on a Form 1099-S after filing—such as an incorrect taxpayer identification number, wrong gross proceeds amount, or inaccurate property address—you must file a corrected form. To do this:
- Obtain a new Form 1099-S.
- Check the “CORRECTED” box at the top.
- Submit it to the IRS along with a corrected Form 1096 (the transmittal form).
- Provide a corrected copy to the seller.
While there's no strict deadline for corrections, the IRS generally prefers them within three years, aligning with the statute of limitations for amended returns.
For Property Sellers
If you receive a Form 1099-S with errors, contact the issuer immediately and request a corrected version. If you've already filed your tax return with incorrect information, you may need to file Form 1040-X (Amended U.S. Individual Income Tax Return) to correct your reported gain or loss.
Key Rules for 2020
Exemptions From Reporting
Not every real estate sale requires Form 1099-S. Key exemptions include:
- Primary residence sales of $250,000 or less ($500,000 for married couples): If the seller certifies that the property is their principal residence and qualifies for the Section 121 exclusion, no Form 1099-S is required.
- Corporate sellers: Transactions where the seller is a corporation or government entity are generally exempt.
- Exempt volume transferors: Regular high-volume sellers (25+ properties/year) may be exempt with certification.
- De minimis transactions: Sales where the total consideration is less than $600.
- Foreclosures and debt satisfaction: Not reportable.
Who Must File
The hierarchy for determining who files is specific:
- Settlement agent listed on the Closing Disclosure (if one exists).
- If not, responsibility falls in order:
- (1) Transferee’s attorney
- (2) Transferor’s attorney
- (3) Title/escrow company
- (4) Mortgage lender
- (5) Transferor’s broker
- (6) Transferee’s broker
- (7) The transferee (buyer)
Multiple Transferors
When property has multiple sellers, a separate Form 1099-S must be filed for each one. Jointly owned spousal property may use a single form unless separate allocations are requested.
Step-by-Step: How It Works (High Level)
For Closing Agents
- At or before closing: Request seller’s TIN using Form W-9 and check exemption status.
- Calculate gross proceeds: Include all cash, notes, assumed mortgages, and liabilities.
- Complete Form 1099-S: Fill boxes with date, gross proceeds, property details, and check relevant boxes.
- File with the IRS: Submit Copy A with Form 1096 by deadline (electronic filing required for 250+ forms).
- Provide seller’s copy: Deliver Copy B by February 1.
For Property Sellers
- Receive your Form 1099-S: Expect by early February following the sale year.
- Review for accuracy: Verify gross proceeds, TIN, and property details.
- Report on your tax return: Typically on Form 8949 and Schedule D, or Form 4797 for business/investment property.
- Calculate your actual gain: Gross proceeds minus adjusted basis = taxable gain/loss.
- Apply exclusions if eligible: Up to $250,000/$500,000 exclusion for qualifying home sales.
Common Mistakes and How to Avoid Them
1. Failing to Obtain Certifications for Exempt Transactions
Always collect written certifications for principal residence exclusions and keep records for four years.
2. Incorrectly Calculating Gross Proceeds
Include all amounts received—do not deduct seller’s expenses.
3. Missing or Incorrect Taxpayer Identification Numbers
Obtain seller’s TIN via Form W-9 before closing. Incorrect TINs can trigger backup withholding.
4. Filing for Multiple Transferors Incorrectly
File a separate Form 1099-S for each non-married seller.
5. Not Reporting Foreign Transferors Properly
Check Box 5 if the seller is foreign. FIRPTA withholding may apply (Form 8288).
6. Charging Separate Fees for Form 1099-S Compliance
Prohibited by IRS—costs must be included in overall fees.
7. Neglecting to Provide Seller Copies on Time
Furnish copies by February 1 to avoid penalties.
What Happens After You File
For Closing Agents
The IRS matches your filing against seller tax returns. Keep all related records for at least four years in case of audit.
For Sellers
Report the sale on your return by the due date (April 15, 2021).
If discrepancies arise, the IRS may send a CP2000 notice—respond promptly with documentation.
Primary home sales under the exclusion limit may owe no tax but still must be reported.
FAQs
1. Do I always receive Form 1099-S when I sell my home?
No. If the sale qualifies fully for the home sale exclusion, the closing agent doesn’t have to file Form 1099-S, though some do for record-keeping.
2. If I didn’t receive Form 1099-S, do I still need to report the sale?
Maybe. If your gain qualifies entirely for exclusion, you generally don’t need to report. Otherwise, report taxable portions.
3. What’s the difference between gross proceeds and taxable gain?
Gross proceeds = total received.
Taxable gain = gross proceeds − adjusted basis (purchase price + improvements − depreciation).
4. Can I correct Form 1099-S after filing my tax return?
Yes. Request a corrected form from the issuer and amend your return with Form 1040-X if needed.
5. What if I sold property I inherited?
Inherited property has a “step-up” in basis. Report on Schedule D and Form 8949; taxable gain is typically small.
6. Do I need Form 1099-S for a like-kind exchange (1031 exchange)?
Yes. Box 4 should be checked, and Box 2 may show $0. Report the exchange on Form 8824.
7. What happens if the closing agent fails to file Form 1099-S?
They may face penalties, but you must still report the sale using your closing documents.
Need More Help?
For complete instructions and the most current information, visit the official IRS Form 1099-S page or download the 2020 instructions.
For personalized advice, consult a qualified tax professional or enrolled agent.
