Form 1099-S is the IRS’s primary form for reporting proceeds from real estate transactions, such as sales or exchanges of property. However, many real estate–related payments fall outside the scope of Form 1099-S but still require information reporting under other 1099 forms. If your business is involved in real estate transactions—whether as a broker, closing agent, property manager, or investor—it’s important to understand these additional reporting requirements.
1. 1099-MISC: Rent, Royalties, and Other Payments
Real estate transactions often involve ongoing payments beyond the initial sale. Common examples include:
- Rents: Reported in Box 1 of Form 1099-MISC when totaling $600 or more in a year. This applies to rental income paid to property owners, but not to payments made to property managers (those may require a 1099-NEC instead).
- Royalties: If a property includes mineral rights or other royalty-generating assets, those payments of $10 or more go in Box 2.
- Prizes and Awards: If a property giveaway or incentive program awards non-employee recipients, these may be reportable in Box 3.
2. 1099-NEC: Payments to Independent Contractors
Real estate businesses frequently hire independent contractors for services tied to a transaction, including:
- Home inspectors
- Appraisers
- Staging professionals
- Contractors for repairs or renovations prior to closing
If you pay $600 or more in a calendar year for these services, issue Form 1099-NEC to report nonemployee compensation.
3. 1099-INT: Interest Payments
When a buyer purchases property via seller financing, the interest portion of payments may need to be reported on Form 1099-INT if you paid $10 or more in interest during the year. This ensures the recipient properly reports the interest income.
4. 1099-DIV: Distributions from Real Estate Investment Entities
If a property is owned through a corporation, REIT, or real estate partnership that issues dividends or capital gains distributions, those payments are reported on Form 1099-DIV. Investors use this form to report dividend income and capital gain distributions on their returns.
5. 1099-B: Broker Transactions
In some real estate investment structures, particularly when dealing with shares in publicly traded REITs or real estate funds, sales of ownership interests are reported on Form 1099-B. This form covers proceeds from broker and barter exchange transactions.
6. 1099-K: Certain Payment Settlement Transactions
If real estate-related payments (such as rent or management fees) are processed through a third-party payment processor like PayPal, and meet the IRS thresholds for Form 1099-K reporting, those amounts may also be reported separately by the processor.
Compliance Best Practices
- Identify all payees early: Track who is receiving payments and their classification—property seller, contractor, investor, or lender.
- Collect Form W-9 upfront: Secure the correct taxpayer information before issuing payments.
- Use the correct form: The type of income determines which 1099 form is required.
- Stay current with thresholds: The IRS reporting thresholds and requirements can change from year to year.
Bottom line: While Form 1099-S handles most real estate sale reporting, it’s not the only form that may apply. Real estate transactions often involve multiple payment types—rents, service fees, interest, dividends—each requiring its own IRS form. By understanding the broader 1099 landscape, you can stay compliant and avoid costly penalties.