What Is Form 1099-A?
Form 1099-A is one of a series of “1099” forms used by the Internal Revenue Service (IRS) to report various nonwage payments and transactions. Form 1099-A is typically used when property has been transferred due to foreclosure.
Whenever a property is sold or transferred, the IRS must be informed. In a standard real estate sale, the seller receives Form 1099-S (Proceeds from Real Estate Transactions) to report the sale to the IRS. In the case of a foreclosure, the seller gets Form 1099-A (Acquisition or Abandonment of Secured Property).
Form 1099-A reports details about the sale, including the date of the transfer, the fair market value (FMV) of the property at the time of the transfer, and the loan balance on the date of the transfer. This information helps the seller determine if there is a gain or loss on the sale of the property—and if any capital gains taxes are due.
- All real estate sales and transfers must be reported to the IRS.
- Form 1099-A is typically used to report the transfer of foreclosed property.
- The IRS treats capital gains from foreclosure the same as gains from a traditional sale.
Who Needs Form 1099-A?
If you have lost a home or other real property to foreclosure, you will receive a copy of Form 1099-A for your records and to help you determine if there is a gain or loss on the sale of the property. If you had more than one mortgage or loan for a single property, you may receive multiple 1099-A forms.
To calculate the gain or loss, subtract the tax basis in the home (the purchase price less any improvements you made) from its fair market value. If you’re not liable for any debt that remains on your loan, you won’t use the fair market value; instead, you’ll use the outstanding mortgage balance at the time of foreclosure.
What Is Form 1099-A Used For?
IRS Form 1099-A is used to notify the IRS that a property has been sold or transferred as a result of a foreclosure. The IRA advises lenders to “file Form 1099-A in the year following the calendar year in which you acquire an interest in the property or first know or have reason to know that it has been abandoned.”
You can exclude up to $250,000 of gains ($500,000 for married couples filing jointly) from the sale or exchange of property owned and used as a principal residence.
How to Read Form 1099-A
You will use the information on Form 1099-A to report the foreclosure on your tax return. Note that if the foreclosure includes a cancellation of debt, you will also receive IRS Form 1099-C.
All copies of Form 1099-A are available on the IRS website.
Here’s a quick rundown of Form 1099-A. The left side of the form features details about the lender and the borrower, including names, addresses, tax identification numbers, and the borrower’s account number. The right side of the form has six boxes:
- Box 1: Date of lender’s acquisition or knowledge of abandonment. Box 1 shows the date the lender acquired the property or the date the lender first knew the property was abandoned.
- Box 2: Balance of principal outstanding. Box 2 shows the balance on your loan (principal only) when the lender acquired the property or the date the lender first knew the property was abandoned.
- Box 3: Reserved. This is usually left blank.
- Box 4: Fair market value (FMV) of property. Box 4 shows the fair market value of the property. If the amount in Box 4 is less than the amount in Box 2 and your debt is canceled, you may have cancellation of debt income. If so, you should also receive IRS Form 1099-C.
- Box 5: Check if the borrower was personally liable for repayment of the debt. Box 5 shows if you were liable for the debt at the time it was created or, if modified, at the time of the most recent modification.
- Box 6: Description of property. Box 6 shows the address of the property. If that doesn’t adequately describe the property, the lender will enter the section, lot, and block of the property.
Where to Get Form 1099-A
If your home is foreclosed on, your bank or lender should send you a copy of Form 1099-A. If you haven’t received a 1099-A and believe you should have, contact your bank or lender.
Where to Mail Form 1099-A
There are three copies of the 1099-A. The lender files Copy A with the IRS, sends you Copy B, and retains Copy C. You should receive Form 1099-A in the mail. You do not need to submit it when you file your tax return, but you should hold onto it for your records.