In order to report the sale, the settlement agent must solicit the seller's U.S. Taxpayer Identification Number (U.S. TIN). Our Company solicits this information using the Substitute form 1099–S, an internal form created by the Company. The form was designed in accordance with the regulations to prove compliance and obtain additional information from the seller needed to properly report the sale.

All blanks on the form must be completed by the seller — not the settlement agent — which is why the form does not auto–populate from the production systems. If it is completed by the settlement agent the Company forfeits its opportunity to have penalties abated.

For example, if the seller completes the Substitute 1099–S in their handwriting but accidentally transposes a number in their social security number, the IRS is going to kick back the 1099–S since the U.S. TIN and name does not match. They also impose a penalty of $250. The IRS will waive the fine when they are provided the Substitute 1099–S proving the U.S. TIN used was provided by the seller.

But, if the form is completed in the production system it is obvious the error was made by the settlement agent, not the seller, and the IRS does not waive the penalty. It is crucial settlement agents resist the urge to complete the form on behalf of the seller.