@lzo wrote:
Thank you for your comment but please note my question - tax does not show on 1098. and a 1099S was not filed.
The "substitute" part means the lender is sending you a piece of paper that is not the exact 1099-S that you can purchase from the IRS (which is a multi-part carbonless form that needs a typewriter, because the IRS computers are still stuck in the 1960s), but it contains the same information as the official 1099-S. You should assume it was filed with the IRS electronically.
If this was the home you lived in as your main residence, enter it in Turbotax as "Sale of my home." You will report your adjusted cost basis and selling price, and if your gain is less than $250K, you won't pay capital gains tax, although you include the sale on a schedule D.
Report property taxes you paid based on your closing statement. This is a fairly common situation and is not likely to trigger an actual "audit" without more indication of problems with your return. It might trigger a letter asking for more details, in which case you reply with a letter and a copy of your closing statement showing the taxes credited to your buyer.
It sounds like property taxes are assessed in arrears in your area--meaning, for example, that you pay your tax bill in December for the previous year. That would explain why you paid the buyer, because the buyer will have to pay a full year of taxes even though they only lived in the home 1 month. You can deduct the taxes you owe for the period of time you owned the home, as if you paid them to the city or county, even though you actually paid them to the buyer.
