"Thanks for your post. Since Rebates should be paid at closing, there is no reason for your realtor to give a 1099. If the commission was $15K and the Realtor agreed to pay $5k towards closing cost, the Realtor will only show income of $10K. They can't double dip and try to write off another $5K. IRS Publication 525 explains this. "
Let's say Realtor company ABC Realty, Buyer Name XYZ.
Situation 1. 5K buyer rebates will show up in HUD-1, cash purchase
HUD-1 shows.
a. Showing ABC Realty Commission 15K
b. But Check show: ABC Reatly Commission 10K
c. Broker Credit Show on HUD-1: There is NO ABC Realty Name, But on buyer side show 5k credit
There is a dicrepency on the written record here in the HUD-1, HUD-1 said ABC Realty made 15k. But check recieved is 10k.
Situation 2: 5K buyer rebates will show up in HUD-1, loan purchase, it is no closing cost loan, lender give 2500 closing cost credt, if lender agree to share Broker Credit field on HUD-1
HUD-1 shows.
a. Showing ABC Realty Commission 15K
b. But Check show: ABC Reatly Commission 10K
c. Broker Credit Show on HUD-1: 7500 (if lender agree to share this field)
There is NO ABC Realty Name, But on buyer side show 7.5k credit
There is a dicrepency on the written record here in the HUD-1, HUD-1 said ABC Realty made 15k. But check recieved is 10k. Broker Credit is sharing between 2 company. How IRS recognize which company give how much credit?
Situation 3: loan purchase, it is no closing cost loan, lender give 2500 closing cost credt, Lender refuse to share Broker Credit field on HUD-1 with ABC Realty
HUD-1 shows.
a. Showing ABC Realty Commission 15K
b. But Check show: ABC Reatly Commission 15K
c. Broker Credit Show on HUD-1: 2500
d. ABC Realty cut a check: To buyer 5K
There is a NO dicrepency on the written record here in the HUD-1 and check, both HUD-1 and title company check said ABC Realty made 15k. ABC Realty Company have to cut a check after closing for the amount 5k to buyer.
Situation 4: NO buyer rebates
HUD-1 shows.
a. Showing ABC Realty Commission 15K
b. But Check show: ABC Reatly Commission 15K
Under all 4 situations, HUD-1 Indicate ABC Realty Commission is 15K. How IRS know which situation we are in? First 3 situations are all have Rebates, but record showing ABC Realty made 15K on written record of HUD-1 which should be forward one copy to IRS.
To me, I prefer to sent Buyer 1099 misc form with 5K in line 3. And then buyer using "Less Common Income" to take back and tell IRS, they are going to apply it toward property basis using decription. Have buyer decide to claim 5K as property basis or income.
There is NO double dipping if Commission Revenue total is 15k to file tax. The system will reduced 5k in 1099 misc from 15k. Of course, if we report Total Commission Revenue is 10k, then sent out 1099misc, it is double dipping.
