TIN compliance for real estate closings

What's different here

• The filer is set by role, not by who pays. IRC 6045(e)IRC 6045Internal Revenue Code, Cornell LII puts the duty on the real estate reporting person, and the first in line is “the person (including any attorney or title company) responsible for closing the transaction” (26 U.S.C. 6045(e)(2)).
• One chance to get the TIN. The seller’s TIN has to be requested no later than closing. There is no second payment to hold back.
• No backup withholding. Unlike most 1099s, a seller who refuses a TIN cannot be backup withheld. The control is the solicitation itself and the record that you made it.
• Two federal regimes on one sale. Form 1099-S reports the gross proceeds. If the seller is foreign, FIRPTA withholding under IRC 1445IRC 1445Internal Revenue Code, Cornell LII applies too, and the W-9 you collect for the 1099-S is also the document that switches FIRPTA off.
• States add a layer. California requires withholding on sales of California real estate.

Who files Form 1099-S

The statute lists the real estate reporting person in order: the person responsible for closing, the mortgage lender, the seller’s broker, the buyer’s broker, and anyone else the regulations designate. Treas. Reg. 1.6045-4(e)Treas. Reg. 1.6045-4Treasury regulations, Cornell LII turns that into a decision tree.

Sources: Instructions for Form 1099-S (Rev. December 2026), Who Must File; Treas. Reg. 1.6045-4(e).

When an employee or agent takes part in a closing, only the employer or principal can be the reporting person, so the title company files, not the escrow officer. A designation agreement can sit on the Closing Disclosure, but it must identify the filer, the parties, the seller, buyer and property, and be signed, dated and kept 4 years by each signer. The IRS wants exactly one filer: “For each transaction, be sure that only one person is responsible for filing and that only one Form 1099-S is filed for each transferor” (Instructions for Form 1099-S).

What is reportable, and the exceptions

A sale or exchange is reportable if it involves any present or future ownership interest in land (including air space), permanent structures, a condominium unit, stock in a cooperative housing corporation, or a non-contingent interest in standing timber. It counts even when the seller owes no tax, such as a main home sale whose gain is excludable under section 121 (unless the exception below applies). From tax year 2026, digital assets paid as consideration go in the new box 2c (Instructions for Form 1099-S, Rev. December 2026).

Sources: Instructions for Form 1099-S, Exceptions and box 7; Treas. Reg. 1.6045-4(c) and (d).

The $600 de minimis rule applies only when the total consideration is certain to be under $600 at closing; a nominal recital of $1.00 plus other valuable consideration does not qualify by itself. Gross proceeds are generally the contract sales price, not reduced by commissions or other selling costs.

The principal residence certification

The residence exception is optional. The seller gives a written assurance, signed under penalties of perjury, that the home is the seller’s principal residence within the meaning of section 121, that the full gain is excludable under section 121, and that there was no period of nonqualified use after December 31, 2008. The ceiling is $250,000 of sale price, or $500,000 if the certification says the seller is married (26 U.S.C. 6045(e)(5); Instructions for Form 1099-S).

• Every owner signs. With joint sellers, the reporting person gets a certification from each one, married or not, or files a 1099-S for any seller who does not certify.
• The IRS sample is incomplete. The Rev. Proc. 2007-12 sample lacks the nonqualified-use and full-exclusion assurances; the seller must add them.
• Timing is generous, choice is not. The certification can come in as late as January 31 of the year after the sale. But “You are not required to obtain the certification. However, if you do not obtain it, you must file and furnish Form 1099-S.”
• Reliance has limits. A reporting person that relies on a proper certification is not liable for the failure-to-file or failure-to-furnish penalties unless it has actual knowledge or reason to know that an assurance is incorrect (Treas. Reg. 1.6045-4(c)(2)(iv)). Keep it for 4 years after the year of sale.

Getting the seller's TIN at closing

The rule is short: “You must request the transferor’s TIN no later than the time of closing,” and “The transferor is required to furnish their complete, non-truncated TIN and to certify that the TIN is correct” (Instructions for Form 1099-S). It can be made in person, in a mailing with other documents, or electronically.

A U.S. seller can complete a Form W-9; a foreign seller gives a TIN on a Form W-8. A substitute works if it says the law requires a correct TIN and warns of civil or criminal penalties, with space for name, address and TIN and a certification under penalties of perjury. Keep the W-9, W-8 or substitute for 4 years (Instructions for Form 1099-S; Treas. Reg. 1.6045-4(l)).

The regulation also protects a reporting person whose seller never provides the number: no penalty applies for the missing TIN if the solicitation rules were followed in good faith, judged with regard to the overall course of conduct for the year (Treas. Reg. 1.6045-4(l)(2)). So the dated solicitation is the key record, as under the W-9 solicitation rules for other 1099s.

One caution on matching. The IRS describes its TIN Matching service as one for authorized payers of income subject to backup withholding (IRS, TIN Matching), and 1099-S proceeds are not. The Form 1099-S page lists the form as not eligible. For sellers, the defense is the certified W-9, read carefully: a name that matches the deed, a well-formed TIN, and the right entity box (the single-member LLC rule applies here too).

Multiple sellers and allocation

Each seller of the same property gets a separate Form 1099-S. At or before closing, the reporting person must ask the sellers how the gross proceeds are split. The answer can be oral, and once one complete allocation (100 percent of the proceeds) is in hand, you can stop asking. If no allocation or a conflicting one comes back, each seller’s form shows the total unallocated proceeds. A late allocation may be used only if it arrives before the 1099-S due date (Instructions for Form 1099-S, Multiple Transferors).

Spouses who held the property together are treated as one seller and need only one form, unless they give an uncontested allocation. A partnership that sells gets one form in its own name, not one per partner. With exempt and nonexempt sellers, only the nonexempt ones get forms.

Backup withholding does not apply

Pub. 1099 lists “Real estate transactions reportable under section 6045(e)” among its examples of payments to which backup withholding does not apply (Pub. 1099, for 2026 returns). The W-9 says the same thing in plain words: “Real estate transactions are not subject to backup withholding,” and in the certification instructions, “For real estate transactions, item 2 does not apply” (Form W-9, Rev. March 2024). The seller may cross out item 2 but still signs.

Foreign sellers: FIRPTA

A sale by a foreign person is still reported on Form 1099-S, with box 7 checked (Instructions for Form 1099-S). On top of that, IRC 1445IRC 1445Internal Revenue Code, Cornell LII requires withholding. The IRS is clear about who owns it: “In most cases, the buyer (transferee) is the withholding agent” (IRS, FIRPTA withholding). Its own closing example ends: “Beyond Corp, not the settlement agent, is the withholding agent and must complete Form 8288 and Form 8288-A” (Instructions for Form 8288, Rev. January 2026).

• Rate. “Generally, you must withhold 15% of the amount realized on the disposition by the transferor.” It drops to 10 percent when the buyer acquires the property as a residence for $1 million or less, and to zero when individuals buy a residence for $300,000 or less.
• Filing. The buyer files Form 8288 and pays the tax by the 20th day after the transfer, with copies A and B of a Form 8288-A for each seller subject to withholding.
• Turning it off. No withholding is generally required if the seller gives a certification of nonforeign status under penalties of perjury with name, address and TIN. “A certification of nonforeign status includes a valid Form W-9 submitted by the transferor.” A disregarded entity cannot certify; its owner does. The title company or the buyer’s agent can hold the certification as a qualified substitute, and the buyer keeps it 5 years.
• Reducing it. A withholding certificate from the IRS can reduce or eliminate the withholding; in certain cases the application can be made on Form 8288-B. The buyer still withholds at closing while an application is pending, but need not file until 20 days after the IRS mails its answer.
• Agents’ exposure. An agent who knows a certification is false must tell the buyer, or is liable up to its compensation from the deal.

The FIRPTA guide covers the full rate table, the nonrecognition notice and the Ogden processing rules.

Commissions, agents and vendors

A closing operation is also an ordinary payer. Form 1099-NEC covers nonemployee compensation of $2,000 or more for tax years after 2025, and that includes commissions paid for services by a nonemployee (Instructions for Forms 1099-MISC and 1099-NEC, Rev. December 2026). A brokerage paying independent agents, or a builder paying subcontractors, is in that position. Payments to corporations are generally excepted, but not payments for legal services.

When a title company disburses funds that belong to someone else, the payor question follows Treas. Reg. 1.6041-1(e)Treas. Reg. 1.6041-1Treasury regulations, Cornell LII: the instructions say you are the payor if you “perform management or oversight functions in connection with the payment, or have a significant economic interest in the payment (such as a lien).” Decide it per payment type, in writing. Unlike sellers, these payees face backup withholding at 24 percent without a TIN, and can be checked with IRS TIN matching before the first check.

California real estate withholding

The FTB’s rule is broad: “Withholding is required when California real estate is sold or transferred.” The real estate escrow person (any attorney, escrow company, title company or other party that closes the deal) must notify the buyer of the requirement. Withholding is not required when the price is $100,000 or less, the property is in foreclosure, the seller is a bank acting as trustee (except under a deed of trust), or the seller certifies an exemption on Form 593 Part III, such as a principal residence. Otherwise the full 3 1/3 percent of the sales price is withheld, or the alternative calculation amount. A missing seller TIN does not stop the withholding. Form 593 and the payment are due within 20 days after the end of the month of closing, and failing to notify the buyer in writing draws a penalty of the greater of $500 or 10 percent of the required withholding (FTB, 2026 Instructions for Form 593). The California withholding page covers the separate 7 percent rules.

Controls for a closing operation

• Fix the filer at file opening. Note who is listed as settlement agent and, if anything is unusual, put a designation agreement on the Closing Disclosure so exactly one party files.
• Solicit the TIN in the opening package. Send the W-9 or a compliant substitute early, date it, and keep it 4 years. Don’t fund the seller until you have either the signed form or a documented refusal.
• Read the W-9 twice: once for the 1099-S, once for FIRPTA. A W-8 or a blank starts the 8288 workflow with the buyer.
• Get every residence certification signed by every owner, with the two assurances the IRS sample leaves out, before January 31 of the following year at the latest.
• Run your own payees like any payer. Match agent, vendor and subcontractor TINs, add an OFAC screen for parties you pay, and apply backup withholding there when it is due.
• For California property, add Form 593 and the buyer’s written notice to the checklist.
• Never charge a separate 1099-S fee. IRC 6045(e)(3)IRC 6045Internal Revenue Code, Cornell LII makes it unlawful, though the cost can be built into your overall fees.

A worked example: the W-9 handed out at the table

A title company is the settlement agent on 2,600 closings in 2026. Its main office sends the W-9 in the opening package and dates the request. One branch hands the form to sellers at the closing table and keeps no record of asking. The company files 2,600 Forms 1099-S, 150 of them with no seller TIN: 90 from the main office and 60 from the branch.

The IRS proposes penalties on the 150 returns at $340 each, $51,000, and the same again under section 6722 for the payee statements, $102,000 in all. Withholding was never a fallback: real estate transactions reportable under section 6045(e) are not subject to backup withholding, and there is no second payment to hold back.

The response that works is the solicitation file. For the 90 main-office sellers, the dated requests show the TIN was asked for no later than closing, and Treas. Reg. 1.6045-4(l)(2)Treas. Reg. 1.6045-4Treasury regulations, Cornell LII protects a reporting person that followed the solicitation rules in good faith. The 60 branch files hold nothing dated, so reasonable cause under Reg. 301.6724-1 has no record to rest on, and $40,800 stands.

The fix is to send the W-9 early and not fund a seller without a signed form or a documented refusal. The 60 missing W-9s also raise a FIRPTA question for each buyer, because a valid W-9 is the usual certification of nonforeign status.

Questions this sector asks