Key Information for 1099-S Reporting

September 26, 2023

We say it every year: Where did the time go? It seems one day it’s the Fourth of July, then suddenly, it’s 1099 season. We realize 1099 reporting is a thankless burden for all title agencies as most are required to report 1099 information to the IRS as well as furnish copies to sellers. It can be an arduous task that takes employee time, while risking penalties from the IRS if reporting is late or done inaccurately.

But don’t panic. This article will help you understand new requirements, provide important dates you need to mark on your calendar and how to best handle 1099 reporting.

What’s New This Year? Not Much

The IRS made two small changes to 1099-S reporting for tax year 2023. First, any entity filing 10 or more 1099-S forms with the IRS must do so electronically. The previous threshold was 250 filings. Almost all title agencies are already using e-filing so this is not likely to affect many of you.

Second, the IRS has launched its new IRS portal for e-filing. This allows agencies to e-file on their own with less red tape than in the previous system. However, we recommend working with a vendor to e-file.  Many vendors, such as AccuTitle, make the process easier, help eliminate costly errors and do not require you to apply for an IRS Transaction Control Code. 

Best Practices

  • Have a 1099-S “quarterback” who creates a 1099-S plan and is responsible for all process aspects. Remember this is a year-round process, not something that you start to consider at the end of the year.
  • Collect all information ahead of the closing. Do not leave yourself scrambling at the end of the year to find a seller’s social security number or discover that the SSN they provided is incorrect. It will be much harder to contact them to provide this information after the transaction is completed.
  • Validate all tax IDs. The best practice is to validate tax IDs prior to the closing but at least do this prior to IRS submission. If the seller provided you with an incorrect TIN, you would likely avoid a penalty from the IRS, but you will have to endure an appeals process—validate to avoid the headache in the first place.
  • Mail 1099-S to sellers each quarter. Do not wait until the end of the year. This way, you reduce the burden come January and allow the seller to identify and correct issues. You could also provide the 1099 at the closing table.
  • Use A 1099-S vendor. Do not make your staff stay late at night stuffing envelopes and then crossing your figures that no mistakes were made. Vendors can allow you to avoid all this hassle and ensure your reporting goes off without a hitch.

What Should Your Software Offer?

When choosing a partner for 1099-S reporting, it is all about having a “one-stop shop” that will catch all errors ahead of reporting.

  • Choose one vendor that can assist with IRS reporting and printing and mailing to sellers (a/k/a payees or transferors). You don’t want to import, validate and track these as separate processes.
  • Ensure they validate every piece of data on the 1099 form. Catching errors now prevents wasted time and money later.
  • Confirm that they have tax ID verification and that it is done directly with the IRS. This is one of the most common errors we see with 1099 reporting, often time it is due to an error made by the seller or their representative.
  • Make sure they have tracking or audit trail capabilities. Ultimately, you will be responsible for all 1099-S reporting so make sure they provide confirmation that 1099 reporting was completed. This should include an IRS Confirmation Number for your reference.

We cannot promise that 1099-S reporting will be easy but if you follow our advice, it will at least be easier.

Important Dates

  • Jan. 6, 2024: First day when 2023 1099-S information can be reported to the IRS. (Based on the end of the IRS FIRE system maintenance window in previous years. Exact date may differ.)
  • Feb. 15, 2024: Due date for furnishing 1099-S to sellers. If mailed, the form must be postmarked by this date. Also, sellers or their accountants often incorrectly believe that January 31st is the due date because this is the case for other 1099 forms. You can point them to this link if you have this issue.
  • March 31, 2024: Due date for reporting 1099-S information to the IRS, if filed electronically.

Key Links

Rick Vaughan is executive vice president of product and data management for AccuTitle, which provides the title management platforms management platforms TitleFusion, Landtech, Closers’ Choice and TrackerPro. Vaughan can be reached at [email protected].

Contact ALTA at 202-296-3671 or [email protected].