If you are filing taxes without the aid of a tax specialist, you may be concerned about accurately reporting your income. Most types of income can be reported as wages on a tax return if it appears on a Form W-2 as net earnings. For other sources of income, however, it’s important to record the correct amount in the proper section of the tax return. A Form 1099-S reports the income you received from a real estate transaction, such as selling your primary residence, a rental property or other real estate investment.
TL;DR (Too Long; Didn't Read)
A 1099-S should be reported on your tax return as a capital gain or loss in the income section.
Reading the Form
The left side of the form should record the information of the seller and the filer of the form. If you or your spouse earned income from a real estate sale and have received a Form 1099-S, then one of your names should be listed in the transferor’s name and address box. The boxes on the right side will list the details of the sale that need to be recorded on a tax return.
Box 1 lists the date of closing, which records the settlement date of the sale. Box 2 lists the gross proceeds from the sale, or your income prior to taxes on the sale. Boxes 3-5 contain important information regarding the sale, but they don’t include amounts that need to be considered for reporting income. The only other box of which to take note is box 6, the buyer’s part of real estate tax.
Evaluating Schedules and Forms
Once you’ve received your Form 1099-S, use the information from this form as well as other documents from the sale of your real estate to complete a Schedule D on that year’s tax return. You’ll also need to complete a Form 8949 to help calculate the final total recorded as your capital gain or loss on your tax return. Most tax software online will guide you through the process of recording and calculating this information, so just make sure the information is on hand so you can answer any questions.
Some Additional Considerations
If you have specific questions or concerns regarding your Form 1099-S or if you’re unsure about the amounts reported on your tax return, then seek counsel from a licensed tax professional prior to filing your taxes. If your taxes are filed incorrectly, and you don’t find the problem until later, you’ll have to amend your taxes. Amending your taxes is never ideal, as it may delay your refund or cause you to repay money to the IRS that you wouldn’t have previously owed. Therefore, it’s always better to be cautious when filing your taxes.
Heidi Nickerson graduated from Liberty University in 2013 with a Bachelor of Arts in English. She has previous work experience in Financial Aid as a Grants Processor, where she was responsible for reviewing students' FAFSA information against their tax documentation. Prior to that, she worked with an Enrolled Agent to help families and small businesses submit their annual Federal tax returns.