1099-S Principal Residence Amend

[geekgirldany]

Looking at a new client's last year tax return... they sold their home and received a 1099-S. The prior tax preparer did not put the 1099-S on a Schedule D.
I am thinking amended tax return or would a matching notice already been generated?
It was filed on 6 month extension last year.

[JohnH]

I'm inclined not to poke the bear. I'd make a note in the client's file to refresh my memory if a CP2000 shows up. I'd also tell the client that the prior preparer omitted this, just in case they want to go back to him/her to get it corrected. And explain that the CP2000 might look pretty scary if it does show up. But I wouldn't jump in to amend someone else's work unless absolutely necessary.

[geekgirldany]

Thanks John.

[abctax]

The instructions from the IRS..

state that they do NOT want the sale of a primary residence reported on Sch D, unless there is a taxable gain. However, I always do (Lacerte allows me to easily force it to print...) IF a F 1099-S is received.

You say "they" sold the home, which indicates that $ 500,000 of gain is (probably) excludible. If the F 1099-S is for less than $ 500,000, I agree with the "don't poke the bear" sentiment.

If/when the IRS notice appears, it's an easy response.

I am curious tho - generally a title company doesn't issue a F 1099-S if a primary residence is sold (at least in my area - here's paperwork to sign during closing stating that this is/was a "primary residence").

[Rapid Robert]

state that they do NOT want the sale of a primary residence reported on Sch D, unless there is a taxable gain.

That is incorrect. From Pub 523: "You received a Form 1099-S. If so, you must report the sale even if you have no taxable gain to report."

[geekgirldany]

I was looking around last night and read that in the pub. I assume matching issues. IRS doesn't know if it is for the principal residence or not.
It was actually a law firm that filed the 1099-S. First one I've seen in a few years... have a new client next week that sold their home last year and got a 1099-S. Maybe it is becoming a standard thing to do now.

[abctax]

That is incorrect. From Pub 523: "You received a Form 1099-S. If so, you must report the sale even if you have no taxable gain to report."

Directly from the IRS website:

https://www.irs.gov/businesses/small-businesses-self-employed/sale-of-residence-real-estate-tax-tips

Reporting the Sale
Do not report the sale of your main home on your tax return unless:

You have a gain and do not qualify to exclude all of it,
You have a gain and choose not to exclude it, or
You have a loss and received a Form 1099-S.

***********
As I said, I always report the sale just to avoid any potential nastygrams from the IRS. Lacerte *does* make us use an override to report it.

[Burke]

I was looking around last night and read that in the pub. I assume matching issues. IRS doesn't know if it is for the principal residence or not.
It was actually a law firm that filed the 1099-S. First one I've seen in a few years... have a new client next week that sold their home last year and got a 1099-S. Maybe it is becoming a standard thing to do now.

These are usually issued by staff, not the actual attorney. And he may have told them to do it on everybody just to be covered. It is not required if they sign the documents that it qualifies as their personal residence (for exclusion.) Yet, I had one a couple of years ago where that form WAS signed by the owner, and even though it had been his personal residence at one time, he had not lived in it for 8 years. He let his father-in-law live there until he died. We had quite a discussion about it as I knew the circumstances -- long-term clients. He was quite surprised he would have to report a gain.

[BHoffman]

There is an adjustment code H on form 8949 to report the sale and then exclude the gain.

[Rapid Robert]

Directly from the IRS website:

That website tip does seem to imply, only, without actually stating so, that a 1099-S with non-taxable gain does not require reporting on the return.

In addition to the Pub I quoted previously, instructions for Form 8949 say:

"If you receive Form 1099-B or 1099-S (or substitute statement), always report the proceeds (sales price) shown on that form (or statement) in column (d) of Form 8949."

The instructions for 1099-S also say, " To determine if you have to report the sale or exchange of your main home on your tax return, see the instructions for Schedule D (Form 1040)". Note they do not say to see a tip on the website.

A Pub and a Form Instruction (and also a reference to a Form Instruction) to me carry more weight than a tip on the website, I'd say the person writing the website text didn't get it right, and probably no editor to review it these days.

[geekgirldany]

Just as a funny side note. I read the instructions for the 1099-S from this client and the attorney must be using a really old program to generate.

"If the real estate transferred was your main home, File Form 2119, Sale of Your Home, with your income tax return even if you sold at a loss or you did not replace your home."

If I remember correctly that form was discontinued in 1997

[Burke]

Just as a funny side note. I read the instructions for the 1099-S from this client and the attorney must be using a really old program to generate.

"If the real estate transferred was your main home, File Form 2119, Sale of Your Home, with your income tax return even if you sold at a loss or you did not replace your home."

If I remember correctly that form was discontinued in 1997

Wow. I would be inclined to bring that to their attention! And to update their software......