Form 1099-S Checklist: 2021 Tax Year
Purpose
Form 1099-S, Proceeds From Real Estate Transactions, reports gross proceeds from real estate transactions to the Internal Revenue Service and the transferor as part of required information returns.
For the 2021 tax year, filers must report all real estate closings completed during the calendar year, including sales or exchanges of residential property, investment property, and rental property conducted in the course of a trade or business.
The form supports accurate reporting of capital gains, sale proceeds, and adjustments related to cost basis, which may ultimately be reflected on individual tax returns using Form 8949 or Form 4797, depending on the nature of the property. Proper completion of IRS Form 1099-S helps ensure compliance with IRS reporting requirements for capital gains and losses arising from real property sales.
Preparation Steps
1. Verify Transferor Identification
Verify whether the transferor is a U.S. person or a foreign person, including a nonresident alien, foreign partnership, foreign estate, or foreign trust. This determination affects Box 5 classification and FIRPTA withholding considerations.
Request the transferor’s taxpayer identification number (TIN) no later than the time of closing. U.S. persons should provide Form W-9, while foreign persons should provide the appropriate Form W-8.
2. Calculate Gross Proceeds (Box 2)
Calculate gross proceeds using the 2021 definition. Include all cash received or to be received, notes payable to the transferor, notes assumed by the buyer, and notes paid off at settlement.
If the transferee assumes a liability of the transferor or takes the property subject to a liability, treat that liability as cash and include it in gross proceeds. Do not include the value of property or services received; those amounts are reported separately in Box 4. Do not reduce gross proceeds by selling expenses such as commissions, legal fees, advertising, or deed preparation costs.
For cash-and-notes transactions, gross proceeds generally equal the contract sales price shown on the Closing Disclosure.
3. Record the Closing Date (Box 1)
Enter the exact closing date in Box 1 and confirm the date falls within the 2021 calendar year.
When a Closing Disclosure is used, enter the Closing Disclosure date. If no Closing Disclosure is used, the closing date is the earlier of the date title transfers or the date the economic benefits and burdens of ownership shift to the transferee.
4. Enter Property Address or Legal Description (Box 3)
Enter the property address in Box 3, including city, state, and ZIP code. If the address does not sufficiently identify the property, include a legal description such as section, lot, and block.
For transactions involving multiple parcels, file separate Forms 1099-S unless aggregation is permitted under the 2021 instructions.
5. Identify Property or Services Received (Box 4)
Check Box 4 if the transferor received or will receive property (other than cash or consideration treated as cash) or services as part of the consideration.
Under post-TCJA rules, only real property qualifies for like-kind exchange treatment. If Box 4 is checked and the exchange qualifies as a like-kind exchange involving real property, the transferor may be required to file Form 8824.
6. Identify Foreign Person Status (Box 5)
Check Box 5 if the transferor is a foreign person. Sales or exchanges involving foreign persons remain reportable on Form 1099-S.
Under the 2021 FIRPTA rules, the transferee may be required to withhold tax when acquiring a U.S. real property interest from a foreign person. Refer to Publication 515 (2021 edition) for withholding guidance.
7. Report Buyer’s Part of Real Estate Tax (Box 6)
Enter the buyer’s portion of the real estate tax for residential transactions. Report only the real estate tax paid in advance by the seller that is allocable to the buyer.
Do not report amounts for real estate taxes paid in arrears. Use the Closing Disclosure or comparable settlement statement to determine the correct allocation.
8. Prepare Required Copies
Prepare Copy A for IRS filing, Copy B for delivery to the transferor, and Copy C for filer records. All copies must contain identical information.
For 2021, Copies B and C are available as fillable PDFs from IRS.gov to support furnishing and recordkeeping.
9. Complete Form 1096 for Paper Filings Only
If filing on paper, complete Form 1096 to accompany Copy A. Form 1096 is not required for electronic filing.
Ensure Form 1096 includes the filer’s EIN, name, address, and total gross proceeds reported on all attached Forms 1099-S. File separate Forms 1096 for each type of information return.
10. Verify Identification Numbers
Verify the filer’s EIN and the transferor’s TIN for accuracy. Filers may truncate a transferor’s TIN on payee statements, such as Copy B, but truncation is not permitted on documents filed with the IRS.
A filer’s EIN may never be truncated.
11. Apply Filing Deadlines
Furnish Copy B to the transferor by February 15, 2022. File Copy A with the IRS by February 28, 2022, if filing on paper, or by March 31, 2022, if filing electronically.
If a due date falls on a Saturday, Sunday, or legal holiday, the deadline moves to the next business day.
12. Review Penalty Provisions
Review the 2021 General Instructions for Certain Information Returns and the 2021 Instructions for Form 1099-S for penalty provisions related to late, incomplete, or incorrect filings.
Confirm all box entries are accurate before submission and ensure the filer’s name and TIN match the information used on Form 945 to avoid mismatch penalties.
Who Must File
Generally, the person responsible for closing the real estate transaction must file Form 1099-S.
When a Closing Disclosure is used, and a settlement agent is listed, that settlement agent is responsible. If no Closing Disclosure is used, responsibility follows the IRS priority order, which may include attorneys, title or escrow companies, mortgage lenders, brokers, or the transferee.
Designation agreements may be used to assign filing responsibility when permitted under IRS rules.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
