Sellers of real property will have certain information regarding the sale reported to the Internal Revenue Service.
This required reporting is a consequence of the Tax Reform Act of 1986; it is intended to encourage taxpayer compliance and aid in audit and enforcement efforts by the I.R.S.
To help you better understand this subject, the Land Title Association has answered some of the questions most commonly asked about Required Reporting to the I.R.S.
Sellers of real property, under guidelines established by the I.R.S., are required to have their gross proceeds from the sale reported on a Form 1099S. When a settlement agent is used, the I.R.S. makes this agent responsible for the delivery of the information on the Form 1099S.
The settlement agent generally will be the escrow agent or title company; however, it may be an attorney, real estate broker or other person providing settlement services.
The Form 1099S is the reporting form adopted by the I.R.S. for submitting the information required by law.
The information will be transferred onto magnetic media by the settlement agent who will store the information and make the required report to the I.R.S. The settlement agent is also responsible for keeping a master copy of all transactions reported.
In general, information required by the I.R.S. falls into the following categories:
The settlement agent is required to request the transferor’s taxpayer identification number(s) (TIN(s)) before the time of closing. You may request a TIN on Form W-9 or use an alternative written request. The IRS has included sample wording of an alternative written request in the instructions for preparation of Form 1099S.
Should the seller fail to provide the identification number and certify its correctness, the settlement agent may choose to:
To place your order, phone toll-free (800) 829-3676.
Article by CLTA