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The IRS requires a settlement agent to solicit the seller's taxpayer identification number (TIN) for 1099–S reporting. There are three ways to properly solicit the seller's U.S. TIN for 1099–S filing purposes:

  • Provide the seller with a W–9 to complete.
  • Use the Substitute 1099–S.
  • Provide the seller with IRS Form W–8BEN.

Company Policy is for settlement agents to use our Substitute 1099–S, but it does not work for all sellers.

As required by the IRS the statement above the seller's signature says, in part, "…I certify that I am a U.S. person or U.S. resident alien…." As a result, those persons or entities who are neither a U.S. person nor U.S. resident alien cannot sign the Substitute 1099–S form, whether or not they have a U.S. TIN.

Instead, properly solicit the TIN from a foreign seller using IRS Form W–8BEN for individuals or IRS Form W–8BEN–E for a foreign entity. These forms should be given to the seller completely blank. In many cases, the seller cannot fully complete and should not give the form back because they do not have a U.S. TIN.

The settlement agent should explain to the seller the sale will be reported to the IRS regardless of whether they have a U.S. TIN or not. Be sure they understand if they receive a U.S. TIN at a later date, to return the completed W–8BEN and the Company will file a corrected 1099–S.

At closing if the seller does not have a U.S. TIN, send the unsigned solicitation and any signed escrow instructions relating to the 1099–S to the National 1099 Department. Be sure to mark the sale as exempt in your production system. If the seller does have a U.S. TIN, and completed and returned the W–8BEN, report the sale as usual in your production system.

Lastly, a Certification for No Information Reporting should not be offered to any foreign seller. Settlement agents should always report the sale of a U.S. Real Property interest by a foreign person.

 

 

 
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