Required Reporting to the I.R.S.

Here are some key points about required reporting to the Internal Revenue Service (IRS) when selling real property:

1. Who is Required to Report: Sellers of real property are required to report their gross proceeds from the sale to the IRS. The responsibility for reporting typically falls on the settlement agent, which could be the escrow agent, title company, attorney, or real estate broker involved in the transaction.
2. Form 1099S: The IRS uses Form 1099S as the reporting form for submitting the required information. The settlement agent is responsible for transferring the information onto magnetic media and making the required report to the IRS. The form includes details such as the seller's name, address, taxpayer identification number, property description, closing date, gross proceeds, and information about the settlement agent.
3. Types of Transactions Requiring Reporting: Transactions covered by Form 1099S include sales and exchanges of residential properties (1-4 family), land (improved or unimproved), commercial or industrial buildings, condominiums, cooperative housing corporation stock, and mobile homes affixed to real property. Foreclosures, property abandonments, and financing or refinancing transactions are excluded from reporting.
4. Seller's Taxpayer Identification Number (TIN): Sellers are required to provide their TIN to the settlement agent before the closing of the transaction. Failure to provide the TIN may result in a delay in closing or the completion of the transaction without the TIN information, with an attempt made to obtain it from the seller.
5. Allocation of Gross Proceeds: If there are multiple sellers involved in the transaction, they may allocate the gross proceeds among themselves for reporting purposes. If no allocation is made, conflicting allocations exist, or an incomplete allocation is provided, the entire gross proceeds will be reported for each seller.
6. Further Information: The IRS provides free publications that explain the tax aspects of real estate transactions, including taxation on selling a home, tax information for homeowners, sales and dispositions of assets, and basis of assets. These publications can be ordered by calling the IRS toll-free at (800) 829-3676.

Understanding the requirements for reporting real property sales to the IRS is essential for sellers to ensure compliance with tax laws and regulations.