If a client sold their main home, does it have to be reported even if they don't have have to pay taxes on it?

[giogis245]

I am having a brain fart and not sure if I need to enter anything?  They lived in house for 4 years qualify to not pay taxes on proceeds. 

[Sara EA]

You have to report it if they received a 1099S, but code it on the Sch D to claim the exemption.

[Lee B]

I have always reported it then claimed the exemption to ensure that my client doesn't get a letter, which I would have discuss with the client and respond to the letter.

[Lion EA]

I agree and report it, claiming the exemption. A client signs a lot of paperwork during their closing and might not know they received Form 1099-S in their packet, or it might be mailed to their old address. It takes almost no time to report it and exclude it; but it takes a lot of time to answer the IRS letter, calm your client, and even figure out what happened in the past.

[Gail in Virginia]

I have had many clients tell me they did not receive a 1099S but when I ask for the closing packet, lo and behold! there is the 1099S.  I had an interesting one this week where the homeowner was deceased, and the mother was the sole heir (no will.) The 1099s was made out to mom, sole heir of son's estate and did not show any tax identification number!  I had to call the title company to see whose tax id they actually reported this in - mom or the estate. 

[ETax847]

Agree with those above.  5 minutes of your time in reporting it can save many headaches of having to deal with the IRS down the road.  

[Patrick Michael]

I also believe it starts the clock for the statute of limitations in case there are issues down the road.  Leave it off and the return is not complete so no running clock.

[Possi]

My client is 66, disabled, and receiving Soc Sec. He took $12k from his IRA. So far, he's not required to file. 

BUT, he sold his home and he didn't yet receive his second stimulus payment. 

So, I was going to file so that the 1099S won't come back on me, and to claim the stimulus. 

Should I? 

[Lion EA]

Yes. You never know when a 1099S is out there. What Gail said. And, if they look at her return when she's 69 and disabled, will she be able to recreate the house basis? Just report it now and start the SOL. What Patrick said. Report it. Depending on your software, just one/two lines to report and claim 121. You don't have to charge her any extra if you don't want to. But report it.

[Abby Normal]

On 2/1/2021 at 7:54 PM, giogis245 said:

I am having a brain fart and not sure if I need to enter anything?  They lived in house for 4 years qualify to not pay taxes on proceeds. 

Tax would be on the gain, not the proceeds.

[Abby Normal]

On 2/1/2021 at 8:30 PM, Sara EA said:

You have to report it if they received a 1099S, but code it on the Sch D to claim the exemption.

The code is on the 8949, and it's conveniently H.

[Catherine]

Always, always, ALWAYS report the house sale and exclude the gain.  The last thing anyone needs or wants is a nastygram from the IRS, two years post-sale, demanding tens of thousands of dollars in taxes not actually owed.  The younger folks just have to change their pants before they call you, screaming or in tears or both, and I frequently wonder how many heart attacks those letters have caused in the elderly.