IRS Instruction 1099-S

IRS Instruction 1099-S – Navigating tax reporting for real estate sales can be complex, but understanding the IRS Form 1099-S instructions is essential for compliance. This form reports proceeds from real estate transactions, helping the IRS track taxable events like property sales. Whether you’re a settlement agent, broker, or involved in closing deals, this SEO-optimized guide breaks down the latest 2025 instructions, filing requirements, and tips to avoid penalties. We’ll use official IRS sources to ensure accuracy.

What is Form 1099-S?

Form 1099-S, titled “Proceeds From Real Estate Transactions,” is an information return used to report the sale or exchange of real estate to the IRS. It captures details like gross proceeds and property descriptions, even if the transaction isn’t taxable (e.g., due to exclusions under section 121). The form helps the IRS verify income from property sales, ensuring taxpayers report gains correctly on their returns. Real estate professionals, such as title companies or attorneys, typically handle filing, but anyone responsible for closing may need to submit it.

What’s New in the 2025 Instructions?

The IRS has updated the instructions for Form 1099-S as of April 2025, making them a continuous-use revision applicable for tax year 2025 and beyond until superseded. Key changes include:

Reduced E-File Threshold: The threshold for mandatory electronic filing dropped from 250 to 10 returns (aggregated across all information returns), effective for filings on or after January 1, 2024, per the Taxpayer First Act and T.D. 9972.
Online Fillable Copies: An online PDF fillable Copy B is now available at IRS.gov/Form1099S to simplify furnishing statements to recipients.
IRIS Portal: The IRS encourages using the Information Reporting Intake System (IRIS) for e-filing information returns.

These updates aim to streamline reporting and reduce paper usage. No major form layout changes, such as split boxes, are noted in the official revision.

Who Must File Form 1099-S?

The primary filer is the person responsible for closing the transaction, often the settlement agent listed on the Closing Disclosure (replacing the old HUD-1 form). If no closing occurs, responsibility falls in this order:

The transferee’s (buyer’s) attorney.
The transferor’s (seller’s) attorney.
The title or escrow company disbursing funds.
The mortgage lender providing the most new funds.
The transferor’s broker.
The transferee’s broker.
The transferee themselves.

Designation agreements can shift this duty to another eligible party (e.g., attorney or lender), but it must be in writing, signed, and retained for 4 years. Only one form is filed per transaction, and employees or agents file on behalf of their principals.

For multiple transferors (e.g., co-owners), file separate forms and allocate gross proceeds reasonably. Spouses are treated as a single transferor unless proceeds are allocated differently.

What Transactions Must Be Reported?

Report sales or exchanges of:

Land (improved or unimproved), including air and subsurface rights.
Permanent structures (e.g., homes, offices).
Condominiums or cooperative housing stock.
Non-contingent interests in standing timber.
Long-term leases (≥30 years, including options).
Involuntary conversions (e.g., under threat of condemnation).
Timber royalties under pay-as-cut contracts (per Announcement 90-129).

Even non-taxable events (e.g., section 351 transfers) must be reported if they qualify as sales for tax purposes. Foreign transferors are included, with cross-references to withholding rules in Pub. 515.

Exceptions to Filing Form 1099-S

Not all real estate transactions require reporting. Key exceptions include:

Principal Residence Exclusion: Sales ≤$250,000 ($500,000 for married couples) qualifying for section 121 exclusion, with a signed certification from the transferor (no nonqualified use after 2008; sample in Rev. Proc. 2007-12). Retain for 4 years.
Corporate or Governmental Transferors: Corporations, governmental units, or exempt volume transferors (≥25 sales to ≥25 buyers in recent years, held for resale).
Non-Sales: Gifts, bequests, or section 1041 marital transfers.
Debt-Related: Foreclosures, abandonments, or debt satisfactions.
De Minimis: Total consideration < $600 (certain on closing date).
Other: Burial plots, unaffixed manufactured homes, or natural resources (except timber).

You may optionally report excepted transactions, but certifications must be obtained and retained.

How to Fill Out Form 1099-S: Box-by-Box Guide?

Form 1099-S (Rev. April 2025) includes the following boxes:

Filer’s and Transferor’s Info: Enter names, addresses, TINs, and phone numbers. Use Form W-9 for TIN solicitation at closing.
Account Number: Required for multiple returns per recipient; optional otherwise.
Box 1: Date of Closing: The settlement date or date of title transfer/economic shift.
Box 2: Gross Proceeds: Total cash, note principal, and assumed liabilities (exclude property/services value or seller expenses like commissions). Enter -0- for like-kind exchanges.
Box 3: Address or Legal Description: Property details; use “Timber royalties” for applicable cases.
Box 4: Check if transferor received property/services as consideration (value not in Box 2).
Box 5: Check if transferor is foreign (e.g., nonresident alien).
Box 6: Buyer’s Part of Real Estate Tax: Prorated taxes paid in advance allocable to the buyer (residential only; per Closing Disclosure).

Truncate TINs on recipient statements, and file with Form 1096 if paper filing.

Filing Deadlines for 2025 Tax Year (Filed in 2026)

For tax year 2025 transactions:

Furnish Copy B to Recipients: By February 17, 2026 (extended from standard January 31 due to form specifics).
File with IRS (Paper): By March 2, 2026.
File with IRS (Electronic): By March 31, 2026.

E-filing is mandatory if filing 10 or more returns. Use IRIS for efficient submission.

Penalties for Non-Compliance

Failure to file, furnish statements, or obtain TINs can result in civil and criminal penalties, as outlined in the General Instructions for Certain Information Returns. Penalties increase with delay (e.g., up to $310 per form for late filing). Incorrect certifications may lead to perjury charges. Retain records like allocations and certifications for 4 years to mitigate risks.

Tips for Compliance and Best Practices

Always request TINs and certifications at closing.
Use software compatible with IRIS for e-filing.
Double-check allocations for multiple sellers.
Consult Pub. 515 for foreign transactions.
Stay updated via IRS.gov/Form1099S for any mid-year changes.

By following these IRS Form 1099-S instructions, you can ensure smooth reporting for real estate proceeds in 2025. If you’re unsure, consult a tax professional. For the full instructions, download from the IRS website.