Ask Terry Questions 1099 on sale of home
Dear Terry
I sold my house in 2021. Should I expect a 1099 from someone?
Thank you
Terry Says
That’s a very interesting question, and I had to do a bit of research on it.
Officially, this is the rule:
When you sell your home, federal tax law requires lenders or real estate agents to file a Form 1099-S, Proceeds from Real Estate Transactions, with the IRS and send you a copy if you do not meet IRS requirements for excluding the taxable gain from the sale on your income tax return.
But, I’m sure you’re asking (as I did) how the lender or agent would know/calculate whether you fit under the $250,000 exclusion from gains ($500k on a joint return).
I also learned this:
Instead of coming in the mail next January, like most 1099 forms, the 1099-S is usually included in your closing documents. If you didn’t get one at closing, you probably will not be getting one. It may be labeled “Substitute form 1099-S”.
So check your closing documents!
And if all else fails, consider this advice from a Forbes article linked below:
If you forget to report a Form 1099, the IRS will send you a computer-generated letter billing you for the taxes. If it’s correct, just pay it. Most states have an income tax, and they will receive the same information as the IRS. If you missed a 1099 on your federal return, your state will probably bill you too.
This same article advises NOT to request a Form 1099S because it might generate TWO forms, causing even more troubles! It might have gone to your previous address! Read this article for details.
You can be sure that if a 1099S was issued, it will be sent to the IRS on a magnetic tape — and matched to your SS#. Then if they contact you, be sure to have the record of your cost of the home (plus any capital improvements) so you can show your “net gain on sale” — and hopefully it will fall under the exclusion described above if it was your residence.
