21.8 Reporting Requirements

The Tax Reform Act of 1986 requires certain parties involved in a real estate closing to report the transaction
to the Internal Revenue Service (IRS) and provide the reported information to each party to the transaction.

Who must report?

The act defines a “real estate broker” (for reporting purposes) as any of the following:

• the seller’s broker
• the buyer’s broker
• the settlement agent, escrow agent, attorney, title company, or other party responsible for closing the transaction
• the mortgage lender
• anyone designated by the IRS

What must be filed?

The reporting person files Form 1099-S (an information return) with the IRS. The form includes the names and addresses
of the parties and information about the sale proceeds.

The reporting person must also provide each party to the transaction with a written statement showing the reporting party’s name/address
and the information reported on the 1099-S.

Special note: non-resident alien sellers (FIRPTA)

If the transaction involves a non-resident alien, the reporting person may have additional tax reporting and withholding
responsibilities under laws such as FIRPTA (Foreign Investment in Real Property Tax Act) and related federal acts.