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Where Does 1099-S Form Go on a Tax Return?
In the USA, when selling real estate, you may get form 1099-S, which reports your real estate transactions to the Internal Revenue Service (IRS). This form is issued to seller by the third-party who is responsible for closing the deal in the first place, like a title company or an estate attorney. It’s important to note that the IRS itself receives a copy of your form so all the information should be correct to avoid any type of penalties.
The question arises that where should this form 1099-S be submitted? Is this form really necessary? And how can it affect your taxes? All these queries will be answered in this complete guide so you don’t have confusion in the end.
What Is Form 1099-S?
It’s a form that’s used by the IRS so they can keep record of your real estate transactions of sale and exchange. It ensures that taxpayers are properly reporting their capital gains and losses to the IRS. Form 1099-S important details such that the profit of the sale, date of the transaction, and the details of the sellers and buyers.
If you are selling a principal residence, rental property, or investment property you may receive Form 1099-S. The filer, who is responsible for issuing the form, is normally the real estate agent who is closing the deal. While the seller is not responsible for the submission of the form it’s his responsibility to mention this transaction while he is filing his tax return of the current year.
When Is Form 1099-S Required?
1099-S is used to report the transaction of the real estate and its his job to see whether or not the transaction should be reported to the IRS if it fills up all the requirements. The seller will determine from the sale transaction that will this be tax deductible or it will be excluded.
For a normal residence, the IRS allows up to $250,000 for a single filer, but for married couples the limit exceeds to $500,000 while filing as a joint family. If the capital gain is more than this then it will be reported to the IRS and if not, then there is no need for any type of form or action taken by the buyer.
But for investment properties, rental properties the IRS requires to report the sale transaction i.e. no limits here everything will be reported.
How to Report Form 1099-S on Your Tax Return
Reporting of the Form 1099-S totally depends on your transaction and type of property you have sold like a personal residence, or rental property. Each category has different type of tax implications.
Reporting the Sale of a Principal Residence
If you sold your principal residence and the sale is taxable, you must report it using the following IRS forms:
FORM 8949 and Schedule D
This form is used to calculate your capital gains and losses to determine the tax owed to IRS.
If the sale qualifies for home sale exclusion that is $250,000 for single filer and $500,000 for married couples then you may only need to report the sale by the Form 1099-S.
Reporting the Sale of a Rental or Investment Property
For rental properties or any investments estates different rules are applied:
Form 4797
This form is basically used to report the sales of business property or any type or rental property.
Form 8949 and Schedule D
As mentioned above this form has the same purpose even for rental and investment properties that is, it’s used to calculate capital gains or losses from the transaction.
What Happens If You Don’t Report Form 1099-S?
As you have came down here after reading all of the above so its pretty obvious now that not reporting Form 1099-S will be major mistake, as the IRS receives a copy and if there will be no transactions on it, the end result will be penalties and audits by IRS against you.
If you believe that your sale qualifies for an issue, even in this situation you should include the transactions on your return to avoid getting any penalties.
The IRS provides a complete outline for instructions for Form 1099-S, where all the requirements are mentioned and you can review them for any future confusions.
The best way to avoid any type of mishaps is to hire a Tax Expert, it will be a wise decision to hire an expert as they know how to deal with stuff like this and can be really helpful to you.
FAQs about Form 1099-S
Do I Need to Report Form 1099-S If I Sold My Home?
If you qualify for the home sale exclusion and your gain is below the IRS limits, you may not need to report the transaction. However, if you received Form 1099-S, you may still need to include the sale on your tax return to show that it is exempt.
What If I Did Not Receive a 1099-S?
Even if you do not receive Form 1099-S, you must still report the sale if it is taxable. The absence of the form does not exempt you from IRS reporting requirements.
Can I Deduct Real Estate Tax and Closing Costs?
Certain closing costs and real estate taxes may reduce your taxable gain. These deductions should be accounted for when calculating your capital gain or loss.
Where Can I Get Help Filing Form 1099-S?
Tax software programs such as Bit Accounting can help ensure that the transaction is reported correctly. A tax professional can also provide guidance if you are unsure how to report the sale.
Final Thoughts on Form 1099-S
Properly reporting Form 1099-S is necessary to file your taxes on your properties to IRS, the factor depends upon the type of property is being sold or bought like Primary Residence, Rental Properties, or investment properties.
If you are sure that your property qualifies for an exclusion, you should still keep your documentation just in case if the IRS come up for an inquiry. If any transaction gain is taxable the it should be reported to IRS accurately without making any mistake and by filing up the right type of form.
Hiring an expert will you in all kind of tax matters, because it’s their job that’s what they do for a living and chances of error gets to minimum sometimes even zero! Always follow a simple rule Don’t disturb the IRS, the IRS won’t disturb you. Good Luck!
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