Real estate transactions will continue to rise with the predictions that the real estate market will stay competitive. There are many factors that are required to ensure a clean closing including appropriate documentation and completion of necessary forms. Every time property is sold, the IRS must be informed.
One form in particular that is sometimes necessary for real estate transactions: the 1099 form. We’re sharing commonly asked questions that can help you understand the purpose of the 1099 form and where it fits into real estate transactions.
What is a 1099 Form?
An IRS 1099 form is a record of income. It tracks how much income an individual receives from someone or some entity other than an employer. The form is completed by the payer and sent to the recipient and the IRS. Examples of this include payments from renters or freelancer income.
There are different types of 1099 forms based upon the type of income or transaction. In real estate transactions, a 1099 form is a tax document that ensures accurate reporting of the full gross proceeds received in a real estate transaction of certain property types.
When Does a 1099 Form Need to be Reported?
It’s important to note that a 1099 form is only required in real estate transactions that do not involve a personal or main home. Not every closing transaction has a 1099 that is required to be filed. Transactions that require a 1099 form include:
- Residential buildings
- Commercial buildings
- Industrial buildings
- A condominium unit
- Share in a co-operative
Why is a 1099 Form Relevant to a Real Estate Transaction?
When a sale or transfer of property occurs, whether voluntary or involuntary, the IRS must be notified. When property is transferred, the capital gains received from the transaction must be properly documented on federal tax returns.
When a real estate transaction occurs, the seller makes a profit that is subject to taxes which is why it’s important to ensure proper record. The 1099 form ensures this by reporting it properly with the seller and the IRS.
How Can Investors Title Company Assist with 1099 Forms?
The individual who is responsible for filing the 1099 form that reports the sale is the individual responsible for closing the transaction according to the IRS. As a title company, Investors Title Company experts act as closing agents, not tax experts. We encourage all sellers consult with their tax advisors with any questions about the implications of a 1099.
We want to ensure you have an efficient closing experience. And, Investor’s Title Company experts can ensure your real estate transaction is completed smoothly.
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If you need assistance with 1099 forms or other title services, contact Investors Title Company.