So you want to sell some property, but you're unsure how it will affect your filing come tax season. If you made a property sale in 2021, you need to report it on your taxes.
To prepare for filing your 2022 taxes, you'll need to file a Form 1099-S. If you're unsure where to start, we've got you covered.
Here are five things you need to know about Form 1099-S this tax season.
1. What is a 1099-S?
A 1099-S is for tax reporting on real estate transactions during the tax year. This includes transactions involving the sale of land, apartment buildings, permanent housing, residential, or commercial buildings.
When real estate sells, the seller gains capital that needs reporting to the IRS. These forms help taxpayers collect the correct information when filing.
2. Who Should File One?
If you're wondering who sends the 1099-S to the IRS, that responsibility falls on the business or other party in the real estate transaction. But, it's still the taxpayer's responsibility to file it on their taxes.
When a taxpayer made a sale on a real estate property and made a financial gain from it, they would need to file the 1099-S on their taxes that year. There are only a few exceptions where you are not responsible for filing it if you're the seller.
3. When to File
1099-S forms must go out by mid-February. They go out to both the taxpayer and the IRS. From there, taxpayers have until the end of March to file.
4. How to Submit a 1099-S and What You'll Need
To submit a 1099-S on your taxes, you'll need to fill in the information from your 1099-s form. This information includes:
- Your name and address
- Closing date
- Gross proceeds from the sale
- Account Number
- Address of the real estate property
- Any taxes paid in advance
When filing, make sure you have all paperwork related to the sale to refer to for accurate information. Depending on which type of property you purchased, you may need some other forms when filing.
Situations where you'll report the sale on other forms include:
- Selling a timeshare (Form 8949 and Schedule D)
- 1099-S Inherited Property (Form 8949, Schedule D, and paperwork for property/inheritance)
- Investment property (Schedule D)
- Business use property (Schedule D and Form 4797)
5. Do I Have to Pay Tax?
If the property you sold is not your main home, you will be responsible for paying taxes because it's considered a capital gain. Don't worry; if you're investing in certain types of properties, such as rentals, there can be some tax benefits too.
Understand 1099-S Filing to Get Ahead This Tax Season
Understanding 1099-S is vital when filing your taxes after selling property. If you specialize in property investment, this information plays a major role in your business venture.
At Philadelphia Property Management, we offer several resources to stay informed on the ins and outs of property investing. Reach out to us today for help getting the best return possible on your property investments.