Form 1099-S: Proceeds From Real Estate Transactions (2017)
What Form 1099-S Is For
Form 1099-S is an information return used to report the sale or exchange of real estate to the Internal Revenue Service. Think of it as a receipt that documents your real estate transaction—not just for you, but also for the IRS. When you sell property like a house, condo, land, or even certain types of cooperative housing stock, the person handling the closing (usually a title company, attorney, or settlement agent) must file this form to report the gross proceeds from the sale.
The form captures essential details: the closing date, the gross proceeds (generally the sales price), and the property address. It also includes special checkboxes to indicate if you received property or services as part of the deal, if you're a foreign person, and what portion of real estate taxes the buyer assumed. The IRS uses this information to track real estate transactions and ensure sellers properly report any taxable gains on their tax returns. IRS
It's important to understand that receiving Form 1099-S doesn't automatically mean you owe taxes. Many homeowners qualify for exclusions—particularly the primary residence exclusion under Section 121, which allows single filers to exclude up to $250,000 of gain and married couples filing jointly to exclude up to $500,000. However, the form's existence means the IRS knows about your transaction, so you'll need to address it appropriately on your tax return. IRS
When You’d Use Form 1099-S (Late/Amended)
Standard Filing Deadlines
The standard filing deadline for Form 1099-S is straightforward: the person responsible for closing must furnish Copy B to you (the seller) by February 15, 2018 for transactions that closed during 2017, and they must file Copy A with the IRS by February 28, 2018 for paper filing or April 2, 2018 for electronic filing. IRS
Corrected Forms
But what happens if something goes wrong? If the filer discovers an error after submitting the original form, they must file a corrected Form 1099-S. Common reasons for corrections include reporting the wrong proceeds amount, using an incorrect taxpayer identification number, or forgetting to check a required box. The corrected form should have the ""CORRECTED"" box checked at the top, and it must include all the correct information along with the original data.
Your Role as a Seller
As a seller, you typically don't file Form 1099-S yourself—the closing agent does. However, you do need to report the real estate transaction on your personal tax return. If you forgot to report it on your original return, you'll need to file an amended return using Form 1040-X. This becomes especially critical if you received Form 1099-S, since the IRS has a copy and will expect to see the transaction reported on your return. Late filing by the closing agent can result in penalties ranging from $50 to $260 per form in 2017, depending on how late the filing is. IRS
Key Rules or Details for 2017
The $250,000/$500,000 Exemption
One of the most significant exceptions to Form 1099-S reporting involves the sale of your primary residence. If you sold your main home for $250,000 or less (or $500,000 or less for married couples), and you provided written certification to the closing agent confirming it was your principal residence with gain fully excludable under Section 121, the closing agent was not required to file Form 1099-S. This certification had to be signed under penalties of perjury and could be obtained any time up to January 31, 2018. IRS
What Gets Reported as Gross Proceeds
Box 2 of Form 1099-S shows the gross proceeds, which typically equals the sales price on your HUD-1 settlement statement. This includes all cash you received, notes payable to you, mortgages assumed by the buyer, and any liens paid off at settlement. It does not include the value of other property or services you received (though those are indicated by a checkbox), nor is it reduced by your selling expenses like real estate commissions, legal fees, or advertising costs. IRS
Reportable Real Estate
The form covers sales of improved or unimproved land, any permanently attached structures (residential, commercial, or industrial buildings), condominiums, cooperative housing corporation stock, and non-contingent interests in standing timber. It does not cover gifts, bequests, refinancing unrelated to acquisition, or sales involving only personal property like mobile homes not affixed to foundations. IRS
Foreign Transferors
A new checkbox was added in 2017 (Box 5) to identify when the seller is a foreign person—a nonresident alien, foreign partnership, estate, or trust. This flag alerts buyers to potential withholding obligations under the Foreign Investment in Real Property Tax Act (FIRPTA).
Step-by-Step (High Level)
While sellers don't typically fill out Form 1099-S themselves, understanding the process helps you know what to expect and how to prepare.
Overview
Step 1: Closing Preparation — Before or at closing, the person responsible for closing the transaction (usually identified on the HUD-1 settlement statement as the settlement agent) must request your taxpayer identification number. This is often done using Form W-9. You're legally required to provide your correct TIN and certify its accuracy under penalties of perjury. IRS
Step 2: Exemption Certification (if applicable) — If you're selling your primary residence for $250,000 or less ($500,000 for married couples) and can exclude all gain under Section 121, you may provide written certification to the closing agent. This certification can help you avoid receiving Form 1099-S entirely. The closing agent may rely on this certification unless they know the information is incorrect. IRS
Step 3: Form Completion by Closing Agent — The closing agent completes Form 1099-S using information from the settlement documents. They enter the closing date (Box 1), gross proceeds (Box 2), property address (Box 3), and check appropriate boxes for property/services received (Box 4), foreign person status (Box 5), and buyer's portion of real estate tax (Box 6).
Step 4: Distribution and Filing — You should receive Copy B by February 15 following the year of sale. The closing agent files Copy A with the IRS (along with Form 1096 as a transmittal) by the end of February for paper filing or early April for electronic filing. You keep Copy B for your tax records. IRS
Step 5: Reporting on Your Tax Return — When preparing your tax return, you'll report the sale even if you don't owe tax on the gain. Primary residences with excludable gains go on Form 8949 and Schedule D. Investment properties and business real estate are reported on Form 4797. If you received like-kind property (indicated by the Box 4 checkbox), you'll also need Form 8824.
Common Mistakes and How to Avoid Them
Mistake #1: Assuming No Form 1099-S Means No Reporting
Many sellers believe that if they didn't receive Form 1099-S, they don't need to report the sale on their tax return. This is incorrect. The IRS requires you to report real estate transactions regardless of whether you received the form. The closing agent may have been exempt from filing it (such as with the principal residence exemption), but you still must report the sale if you're required to file a return and the gain exceeds your exclusion. IRS
Mistake #2: Confusing Gross Proceeds with Taxable Gain
The amount shown in Box 2 (gross proceeds) is not your taxable gain. Your actual gain is calculated by subtracting your adjusted basis (original purchase price plus improvements minus depreciation) from the sales price, then subtracting selling expenses. Many homeowners panic when they see a large number in Box 2, not realizing they can deduct their original cost and improvements. IRS
Mistake #3: Failing to Provide Accurate TIN
Some sellers provide incorrect Social Security numbers or fail to respond to TIN requests from closing agents. This can trigger backup withholding at 28% of gross proceeds, significantly reducing your proceeds at closing. Always verify your TIN carefully and respond promptly to requests. IRS
Mistake #4: Not Understanding the Foreign Person Checkbox
If Box 5 is checked, it indicates you're a foreign person, which triggers different tax rules and withholding requirements. U.S. citizens and resident aliens should ensure this box is not incorrectly checked, as it could cause unnecessary withholding and complications.
Mistake #5: Ignoring Box 6 (Buyer's Part of Real Estate Tax)
Box 6 shows real estate taxes you paid in advance that are allocated to the buyer. If you've already deducted these taxes in a prior year, you must generally report this amount as income. Failing to do so can result in an incorrect tax return. IRS
What Happens After You File
IRS Matching Program
The IRS uses sophisticated computer systems to match the information from Form 1099-S against your personal tax return. When you file your Form 1040, the IRS checks whether you've reported the real estate transaction. If there's a mismatch—for example, if you received Form 1099-S but didn't report the sale on Schedule D or Form 4797—you'll likely receive a CP2000 notice (Underreporter Inquiry) asking why the transaction wasn't reported. IRS
Documentation Requirements
You should keep Copy B of Form 1099-S along with all other sale-related documents (settlement statement, purchase records, improvement receipts, etc.) for at least three years after filing your return, or longer if you have specific circumstances that extend the statute of limitations. The closing agent must retain certification forms for at least four years.
Exclusion Verification
If you claimed the Section 121 primary residence exclusion on your tax return, the IRS may review whether you met the requirements: owning and using the home as your principal residence for at least two of the five years before the sale, and not having used the exclusion on another home sale in the prior two years.
Amended Returns
If you discover an error in how you reported the sale after filing, you can file Form 1040-X (Amended U.S. Individual Income Tax Return) to correct it. Common reasons include discovering additional basis from forgotten improvements, realizing you qualified for an exclusion you didn't claim, or finding calculation errors. You generally have three years from your original filing deadline to file an amended return.
FAQs
Q: Do I need to report the sale of my home if I received a Form 1099-S but had no taxable gain?
Yes, in most cases. If you received Form 1099-S, the IRS also received a copy, so they expect to see the transaction on your return. You'll report it on Form 8949 and Schedule D, showing your cost basis and exclusion. However, if you sold your main home, can exclude all the gain under Section 121, and didn't receive Form 1099-S, you generally don't need to report it. IRS
Q: What if I didn't receive Form 1099-S but I know I sold real estate?
You must still report the sale on your tax return. The closing agent may have been exempt from filing Form 1099-S (perhaps you certified your primary residence sale qualified for the exemption), but you're still responsible for proper reporting. Use your closing documents to calculate proceeds and basis. IRS
Q: Can selling expenses like real estate commissions and legal fees reduce my taxable gain?
Yes, although these expenses don't reduce the gross proceeds shown on Form 1099-S, they do reduce your taxable gain when you calculate it on your tax return. Selling expenses are subtracted from the sales price when determining your gain or loss. IRS
Q: I sold rental property. Do I report it differently than selling my primary residence?
Yes. Rental and investment property sales are reported on Form 4797 (Sales of Business Property) rather than just Schedule D. You'll also need to recapture any depreciation you claimed while renting the property, which is taxed at a maximum 25% rate rather than capital gains rates. IRS
Q: What if the gross proceeds amount on Form 1099-S is incorrect?
Contact the closing agent immediately and request a corrected Form 1099-S. They'll file a corrected version with the IRS and provide you with an updated copy. Don't just report a different amount on your tax return without explanation, as this will trigger an IRS inquiry.
Q: Does Form 1099-S report my profit or just the sales price?
Form 1099-S reports gross proceeds (generally the sales price), not your profit or taxable gain. Your actual gain depends on your cost basis, improvements, selling expenses, and any exclusions you qualify for—none of which appear on Form 1099-S. You calculate the actual gain when preparing your tax return.
Q: I sold property with my spouse. Should we receive one or two Forms 1099-S?
If you held the property as joint tenants, tenants by the entirety, tenants in common, or community property, the closing agent typically files only one Form 1099-S showing either spouse's name and TIN. However, if the closing agent received an allocation request from you, they might file separate forms for each spouse. IRS
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