IRS Form 1099-S is a critical step in the closing process for real estate transactions and if you take on the responsibility of closing deals on your own, then this is something you should be doing.
Why is IRS Form 1099-S Necessary?
IRS Form 1099-S aims to make sure that sellers document the full capital they gain on each year’s tax return so that they can pay the proper taxes to the IRS.
For instance, if someone buys a property for $150,000 and sells it for $250,000 (gaining $100,000 of capital gains income)- the next thing to do is record this as a taxable income at the end of the year and if they don’t, the 1099-SS will help to keep the IRS informed of the activities going on.
Who Has to File IRS Form 1099-S?
The IRS can be filled by anyone and this depends on the sales price, who the closing agent is, the seller, and the type of property that’s being sold or bought. The person who is responsible for filing out the 1099-S can be determined after considering these factors.
Here are the pros:
-If you close a deal with a title company or an attorney, then they will take on the responsibility of filling the IRS Form 1099-S for you.
-If the seller is a corporation or if the property got sold at an auction, then the transaction cannot be reported.
-The transaction cannot be reported if the total money and services received are not more than $600.
These are a few exceptions for fillinfilingRS Form 1099-S among others.
Here are the cons:
-If your transaction exceeds any of these exceptions, and you’re closing the transaction on your own, then you’re likely expected to fill the IRS Form 1099-S according to the IRS instructions which stipulates that “the person responsible for closing the transaction” is expected to fill the Form 1099-S
Do You Always Get a 1099-S When You Sell A House?
You don’t always get a 1099-S when you sell your house because you may have already filled in a form that ensures you don’t have a taxable gain on the sale of your house when selling your home. There’s a 1099-S Exemption Certification form you have to complete and you have to meet certain critercriteriaat you don’t have to report the sale on your tax return. Then, the title company cannot send you an IRS-adorn 1099-S to fill out after closing the sale of your house.
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