When an individual sells a house, is a notice sent to the IRS?

Answer 1

Mathew is correct in what he says but there is a bit more detail.

The sale price has to be below $250,000 (or $500,000 for married Filing Jointly) - it will not be enough to convince the settlement agent that the gain will be less than that. the seller must give a certificate, under penalty of perjury, that any gain will be exempt. in other words, giving a false certificate is a criminal offense and you can be sent to prison. If the settlement agent knows that the certificate is not accurate he can issue the 1099-S anyway. This might happen, for instance, if the agent knows that the seller bought the house less than two years ago or did not use it as his main residence for two out of the last five years.

Frankly, it seems like too much effort to get the certificate and comply with the record-keeping requirements. Much better just to let the agent issue it along with (no doubt) the numerous others handled by the same firm over the year.

Answer 2

You will sign a form at closing stating whether or not you've lived in the home for 2 of the last 5 years. If you have, and are not a foreign person, and there is less than $250k (single) or $500k (married filing together) of capital gains, then no notice is sent, because no taxes are due.

If you are a foreign person, a notice will be sent and (I forget how much, either 20% or 30%) part of the proceeds will be held in escrow until tax issues are settled.

Hope this answers your questions.

Answer 3

Yes. The IRS receives a notice of the sale and you will receive a 1099 form showing the proceeds of the sale. Depending upon your individual circumstances the sale may or may not make a difference in your tax situation.

Answer 4

The form is a 1099S and it will be sent unless you convince the escrow people that you would not have a tax liability due to the main home exclusion.

Answer 5

matthew is right on